MATERIALS - HKEXnews

Chin

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China National MaterialsCompany Limited

2013 An

nu

al Rep

ort

MATERIALSBRING A PROSPEROUS LIFE

Annual Report 2013


A joint stock company incorporated in the People’s Republic of China with limited liability

(Stock Code: 01893)

1Annual Report 2013

CONTENTS

CORPORATE INFORMATION 2

CORPORATE PROFILE 4

CORPORATE STRUCTURE 5

FINANCIAL SUMMARY 6

BUSINESS SUMMARY 7

CHAIRMAN’S STATEMENT 8

MANAGEMENT DISCUSSION AND ANALYSIS 11

BIOGRAPHY OF DIRECTORS,

SUPERVISORS AND SENIOR

MANAGEMENT 25

DIRECTORS’ REPORT 33

SUPERVISORY COMMITTEE’S REPORT 47

CORPORATE GOVERNANCE REPORT 49

INDEPENDENT AUDITOR’S REPORT 63

CONSOLIDATED STATEMENT OF

PROFIT OR LOSS 65

CONSOLIDATED STATEMENT OF PROFIT OR

LOSS AND OTHER COMPREHENSIVE INCOME 66


FINANCIAL POSITION 67


CHANGES IN EQUITY 69


CASH FLOWS 72

NOTES TO THE CONSOLIDATED

FINANCIAL STATEMENTS 75

DEFINITIONS 265

China National Materials Company Limited2

CORPORATE INFORMATION

As at 31 December 2013

DIRECTORSExecutive Directors1

LIU Zhijiang (Chairman)LI Xinhua (Vice-chairman)

Non-executive Directors2

YU Shiliang

ZHANG Hai

LI Jianlun

YU Guobo

TANG Baoqi

Independent Non-executive Directors2

LEUNG Chong Shun

LU Zhengfei

WANG Shimin

ZHOU Zude

SupervisorsXU Weibing (Chairman)ZHANG Renjie

WANG Jianguo

WANG Yingcai3

QU Xiaoli

STRATEGY COMMITTEE4

LIU Zhijiang (Chairman)YU Shiliang

LI Xinhua

ZHANG Hai

LI Jianlun

YU Guobo

ZHOU Zude

AUDIT COMMITTEELU Zhengfei (Chairman)WANG Shimin

YU Shiliang5

REMUNERATION COMMITTEEWANG Shimin (Chairman)6

LEUNG Chong Shun

LU Zhengfei

NOMINATION COMMITTEELIU Zhijiang (Chairman)7

WANG Shimin8

ZHOU Zude

1 On 5 February 2013, Mr. LIU Zhijiang was re-designated from a non-executive Director to an executive Director of the Company

and was appointed as the Chairman of the Board; Mr. LI Xinhua was appointed as the Vice-chairman of the Board; Mr. YU

Shiliang was re-designated from an executive Director to a non-executive Director. Please refer to the announcement of the

Company dated 5 February 2013 for details.2 On 30 July 2013, Mr. LI Jianlun and Mr. YU Guobo were appointed as non-executive Directors of the Company, and Mr.

SHI Chungui ceased to be an independent non-executive Director of the Company. Please refer to the announcement of the

Company dated 30 July 2013 for details.3 On 30 July 2013, Mr. YU Xingmin ceased to be a Supervisor of the Company, and Mr. WANG Yingcai was appointed as a Super-

visor of the Company. Please refer to the announcement of the Company dated 30 July 2013 for details.4 On 5 February 2013, Mr. LIU Zhijiang was appointed as the Chairman of the Strategy Committee in place of Mr. YU Shiliang. On

30 July 2013, Mr. ZHANG Hai, Mr. LI Jianlun and Mr. YU Guobo were appointed as members of the Strategy Committee.5 On 5 February 2013, Mr. YU Shiliang was appointed as a member of the Audit Committee in place of Mr. LIU Zhijiang.6 On 30 July 2013, Mr. WANG Shimin was appointed as the Chairman of the Remuneration Committee in place of Mr. SHI

Chungui.7 On 5 February 2013, Mr. LIU Zhijiang was appointed as the Chairman of the Nomination Committee, and Mr. YU Shiliang ceased

to be a member of the Nomination Committee.8 On 30 July 2013, Mr. WANG Shimin was appointed as a member of the Nomination Committee in place of Mr. SHI Chungui.

3Annual Report 2013

CORPORATE INFORMATION


SECRETARY TO THE BOARDGU Chao

JOINT COMPANY SECRETARIESGU Chao

YU Leung Fai (HKICPA, AICPA)

AUTHORISED REPRESENTATIVESLIU Zhijiang1

YU Leung Fai (HKICPA, AICPA)

REGISTERED OFFICE AND PLACE OF BUSINESS11 Beishuncheng Street

Xizhimennei

Xicheng District

Beijing 100035, the PRC

PLACE OF BUSINESS IN HONG KONG7th Floor, Hong Kong Trade Centre

161-167 Des Voeux Road Central

Hong Kong

LEGAL ADVISORSDLA Piper (as to Hong Kong law)Jia Yuan Law Firm (as to PRC law)

AUDITORSHong Kong auditor

SHINEWING (HK) CPA Limited

PRC auditor

ShineWing Certified Public Accountant LLP

HONG KONG H SHARE REGISTRAR AND TRANSFER OFFICEComputershare Hong Kong Investor Services Limited

17M Floor, Hopewell Centre

183 Queen’s Road East

Wanchai, Hong Kong

STOCK CODE01893

COMPANY WEBSITEhttp://www.sinoma-ltd.cn

INVESTOR CONTACTTel: (8610)8222 9925

Fax: (8610)8222 8800

E-mail: [email protected]

1 On 5 February 2013, Mr. LIU Zhijiang was appointed as the authorised representative of the Company in place of Mr. Yu Shiliang.


CORPORATE PROFILE

China National Materials Company Limited is a joint stock company approved by the State-owned Assets Supervision and

Administration Commission of the State Council and established jointly by China National Materials Group Corporation

Ltd. and other promoters. The Company was incorporated on 31 July 2007 and was listed on the Main Board of the

Hong Kong Stock Exchange on 20 December 2007.

The Company is mainly engaged in cement equipment and engineering services, cement and high-tech materials

businesses. The Company possesses series of core technologies such as glass fiber, composite materials, synthetic

crystals, advanced ceramics and new dry process cement technology, with pioneering research and development

capabilities, strong implementation capability for commercialisation of innovative technologies, successful mergers and

acquisitions experience and unique business model.

The Company is the largest provider of cement equipment and engineering services globally and is a leading producer of

non-metal materials in the PRC. The Company is the only enterprise in the non-metal materials industry in the PRC with

a business model that integrates research and development, industrial design, equipment manufacturing, engineering and

construction services and production.

The Company is committed to maintaining sustainable development for the long term and continuously creates value for

all our stakeholders including Shareholders, customers, employees and the society. The Company upholds our positioning

as an innovative, international and value-added enterprise. We strive to become the leading provider of technology, core

equipment and engineering and system integration services in the global cement engineering industry and to become a

prominent developer and provider of non-metal materials and related products globally.

5Annual Report 2013

CORPORATE STRUCTURE


41.84%

8.96%

8.67%

3.66%

32.60%

1.80%

1.75%

0.72%

42.46%Sinoma International

Sinoma Mining

Tianshan Cement3

Sinoma Cement

Ningxia BuildingMaterials4

Qilianshan Holdings

Sinoma Science &TechnologySinoma AdvancedMaterials

CTG

Sinoma Jinjing

Xiamen Standard Sand

Sinoma (Hong Kong)

100%

35.49%

100%

100%

47.54%

51%

54.32%

50.01%

99.46%

100%

51%

SinomaGroup

Cinda

TaishanInvestment

Well Kent1

TianshanGroup2

BBMG

ZiboHi-Tech

Holders ofH Shares

China NationalMaterials Company

Limited

Cement Equipmentand

Engineering Services

Cement

Hi-Tech Materials

Notes:

1. Well Kent is a wholly-owned subsidiary of Cinda.

2. Sinoma Group holds 50.95% equity interest in Tianshan Group.

3. The equity interest in Tianshan Cement held by the Company increased from 35.39% to 35.49% as a result of the repayment

made by Great Wall Guoxing Financial Leasing Co., Ltd. (formerly known as Xinjiang Finance Lease Company Limited) (a

shareholder of Tianshan Cement) with 907,182 shares in March 2013 which was advanced by the Company during the share

segregation reform of Tianshan Cement in 2006.

4. The equity interest in Ningxia Building Materials held by the Company decreased from 47.57% to 47.54% as a result of the

compensation made by the Company to Ningxia Building Materials with the 137,792 shares held by the Company in Ningxia

Building Materials (these shares had been transferred in April 2013) pursuant to the Agreement for the Compensation of the

Difference between Actual Earning and Net Profit Forecast of Qingtongxia Cement and the Supplemental Agreement to the

Agreement for the Compensation of the Difference between Actual Earning and Net Profit Forecast of Qingtongxia Cement

entered into by Ningxia Building Materials and the Company as well as the Assurance Report on the Fulfillment of Earning

Forecast for 2012 of Ning Xia Qingtongxia Cement Co. Ltd. issued by ShineWing Certified Public Accountant LLP. Please refer to

the announcements of the Company dated 27 September 2010, 29 October 2010, 7 December 2010, 13 January 2011, 10 March

2011, 29 March 2011, 8 July 2011, 11 November 2011 and 22 December 2011 respectively.

The above chart covers first-tier subsidiaries only. Subsidiaries on second-tier and below are not listed.


FINANCIAL SUMMARY

For the year ended 31 December

2013 2012 2011 2010 2009

RMB million RMB million RMB million RMB million RMB million

(Restated)3 (Restated)2 (Restated)1

Turnover 52,081.32 46,187.07 50,718.59 44,497.16 30,367.97

Profit for the year 1,465.41 1,545.84 3,964.50 3,409.72 1,997.52

Profit for the year attributable to owners of

the Company 397.51 452.29 1,462.57 1,099.98 719.50

Earnings per Share – Basic (RMB) 0.11 0.13 0.41 0.31 0.20

As at 31 December

2013 2012 2011 2010 2009

RMB million RMB million RMB million RMB million RMB million

(Restated)3 (Restated)2 (Restated)1

Total assets 94,512.03 88,004.71 79,746.88 67,204.60 49,760.24

Total liabilities 66,343.88 60,707.49 55,963.82 46,551.92 35,795.19

Equity attributable to owners of the Company 11,405.24 11,477.77 10,978.01 9,788.04 8,264.06

Equity per Share (RMB) 3.19 3.21 3.07 2.74 2.31

Notes:

1. The figures for 2010 have been restated due to the completion of acquisitions of Sinoma Equipment Maintenance (Shangrao)

Co., Ltd., Sinoma Slip-form Leasing (Shangrao) Co., Ltd., Suzhou Concrete Cement Product Research Institute Company Limited

and Shandong Research & Design Institute of Industrial Ceramics Co., Ltd. during 2011, which were under common control.

2. The figures for 2011 have been restated due to the completion of acquisitions of Nanjing Cement Industry Design & Research

Institute Co., Ltd., Sinoma Asset Management (Suzhou) Company Limited, and Tangshan Sinoma Property Management

Company Limited during 2012, which were under common control.

3. The figures for 2012 have been restated due to the completion of acquisitions of Handan Sinoma Asset Management Co., Ltd.,

Chengdu Cement Industry Design & Research Institute Co., Ltd., Tianjin Sinoma Asset Management Company Limited, China

Building Materials Industry Construction Tianjin Engineering Co., Ltd., Suzhou Design and Research Institute of Non-metallic

Minerals Industry Co., Ltd. and Nanjing Fiberglass Research & Design Institute Co., Ltd. (all were under common control), the

change from proportion consolidation to equity method of accounting of jointly controlled entities and the adjustment of defined

benefit obligations during the reporting period.

7Annual Report 2013

BUSINESS SUMMARY

Cement Equipment And Engineering Services

2013 2012 Change (%)

Amount of new order intakes (RMB million) 34,212 30,832 10.96

Amount of backlog (RMB million) - as at 31 December 56,742 55,187 2.82

Cement

2013 2012 Change (%)

Sales volume of cement (‘000 tonnes) 74,700 63,020 18.53

Sales volume of clinker (‘000 tonnes) 10,030 8,800 13.98

High-tech Materials

2013 2012 Change (%)

Sales volume of glass fiber and products (‘000 tonnes) 448 442 1.36

Sales volume of fan blades for wind power generators (set) 1,816 1,267 43.33

Sales volume of solar-energy fused silica crucibles (unit) 37,300 32,265 15.61

Sales volume of natural gas cylinders (unit) 254,471 205,318 23.94


CHAIRMAN’S STATEMENT

Dear Shareholders,

On behalf of the Board, I present to you the annual report and results of the Company for 2013, and to report to you on

the development focus of the Company for 2014.

In 2013, despite the slow recovery in the global economy, the aftermath of the global financial crisis persisted, leading to

stagnant international trade and greater pressure from trade protectionism. Affected by several factors such as excessive

production capacity and insufficient effective demand (especially shrinking overseas demand), the PRC economy was

faced with greater downward pressure. Responding to the complicated external environment and increasingly intensified

market competition, the Company aggressively exploited new market and proactively adjusted industrial structure,

meanwhile strived to increase revenue and efficiency and reduce expenses and costs, so as to effectively curb the

decline in profits and continuously strengthen its market competitiveness. During the reporting period, turnover of the

Group was RMB52,081.32 million, representing a year-on-year increase of 12.76%. Profit for the year was RMB1,465.41

million, representing a year-on-year decrease of 5.20%. Profit for the year attributable to owners of the Company was

RMB397.51 million, representing a year-on-year decrease of 12.11%. Earnings per share of the Company amounted to

RMB0.11.

CEMENT EQUIPMENT AND ENGINEERING SERVICES

Facing the significant decline in the fixed asset investments in domestic cement industry and the complicated and

volatile environment of the international market, the segment aggressively explored the overseas markets by leveraging

on its market competitive strength and advantages in the industry, with the amount of new order intakes for the year

amounting to RMB34.2 billion, representing a year-on-year increase of 11%, of which the amount of new order intakes

from the overseas markets amounted to RMB23.3 billion, representing a year-on-year increase of 68%. As at 31

December 2013, the amount of backlog of the segment amounted to RMB56.7 billion, laying a solid foundation for the

sustainable and healthy development of the segment in future.

CEMENT

The segment managed to overcome the dual adverse impacts of slowdown in the domestic economy and excessive

production capacity in the cement industry, and reinforced marketing efforts to continuously increase its market share,

achieving a year-on-year growth of 18% in the sales volume of cement and clinker. While maintaining its advantages

in the regional market, the segment enhanced benchmark comparison management, continuously improved operation

management and reduced production costs, resulting in a year-on-year decrease of 10% in the cost for each tonne of

cement. Responding to the excessive production capacity in cement industry, the segment accelerated the phase-out of

backward production capacity and technology upgrade of the existing production lines, so as to adjust its development

pace at the right time and to the right extent. As at the end of 2013, the production capacity of cement amounted to

105.88 million tonnes. The segment continued to extend its industrial chain, with the production capacity of commercial

concrete amounting to 32.65 million cubic meters. The scale of the cement and commercial concrete business

maintained stable growth.

9Annual Report 2013


HIGH-TECH MATERIALS

Due to the impact of shrinking overseas demand, trade protection, excessive production capacity and weak domestic

demand, the major product markets of the segment remained sluggish with difficulties in product sales and payment

collection. In light of the unfavorable environment, the segment proactively expanded market coverage by forging alliance

with strategic partners and adopting flexible sales strategies, meanwhile strived to strengthen its competitiveness by

enhancing management capability, constantly reducing costs and optimizing process and workflows. The wind power fan

blade business proactively developed new products, focusing on development of large-size fan blades to increase the

added value of products, resulting in an increase of 3 percentage points in gross profit margin of products. The segment

stepped up efforts to explore the domestic and overseas markets in the CNG cylinder business, with the sales volume

increasing by 28% over the same period of last year. In addition to its efforts to enhance market promotion in the LNG

cylinder business, the segment continued to improve product quality and production scale. The Company constantly

adjusted its product mix and strengthened management on the coordinated development of sales and production in the

glass fiber and products business, achieving a production-to-sales ratio of 103% during the reporting period.

PROSPECTS

In 2014, despite the overall slow recovery in the global economy, the path to recovery will remain very bumpy, and

competition in the international market will become more intensified. The slowdown trend in overseas demand growth

will not be obviously improved. Although the long-term prospect of the PRC economy is positive, the foundation for

recovery is not very solid, thus the government will deepen reform and seek growth while maintaining stabilization.

The market competition will get intensified, and efforts will be made to deepen structural adjustment. The increase

in the costs of production essentials and the constraints in the resource and environment will constantly increase the

pressure in cost. The benefits and temporary setbacks brought by reform will impose far-reaching impact on the future

development of the Company. Seizing the opportunities brought by deepening of reform, structural adjustment as well

as promotion of urbanization and the development of the central and western regions, the Company will continuously

optimize enterprise structure and resource allocation, enhance basic management, strengthen technology innovation

and new product R&D and accelerate technology reform on existing industries and product upgrade, so as to enhance

the market competitiveness of its products. Adhering to the industry development concept of “innovation orientation,

quality and efficiency and sustainable development”, the Company will shift its focus from scale expansion to quality and

efficiency. In an effort to further deepen the strategy of “overseas expansion”, the Company will continuously increase

the share of overseas assets and businesses, step up efforts in exploring the international market, facilitate the transition

from domestic-oriented operation to internationalized operation and make continuous efforts to innovate its business

model, so as to improve the influence of the SINOMA brand and its capability for technology innovation. By enhancing its

capability in strategic leading, the Company will allocate quality assets to the high-end of the industrial chain and value

chain, and proactively promote the extension of industrial chain into the professional and high-end market. Furthermore,

the Company will strive to reduce costs and increase efficiency, allocate funds reasonably, reduce financing costs and

improve capital utilization, so as to maintain stable growth of the business.


The cement equipment and engineering services segment will continue to explore the international market, in an effort to

continuously increase its market share in Asia and Africa and strengthen the exploration of the cement engineering EPC

market focusing on states and regions including India, Russia and South America. The segment will proactively explore

the domestic market in energy conservation and environmental protection and technology reform of cement enterprises.

While maintaining its competitive edge in the cement engineering service market, the segment will continue to perfect

and innovate its business model, improve product and service quality, and facilitate the diversified development in the



related industries. The segment will actively develop the business of diversified engineering services, increase the share

of spare parts and post-service businesses, and vigorously promote the business of co-disposal of waste, sludge and

urban garbage by cement kiln. The segment will further strengthen its efforts in the R&D of equipments, accelerating

the expansion of the equipment manufacturing business into the mining, metallurgical, chemical and power industries.

CEMENT

The release of the “State Council’s Guidelines on Addressing Severe Overcapacity Contradiction” and the “Notice

on Curbing the Blind Expansion of Industries with Serious Overcapacity jointly issued by National Development and

Reform Commission and the Ministry of Industry and Information Technology”, and the increasing efforts by the local

governments in eliminating backward production capacities and closing over-polluted enterprises, will help to promote the

positive development of cement industry. The segment will seize the opportunities brought to the industry by the State’s

economic policy to strengthen construction of new urbanization and the renovation of squatter settlements as well as the

State Council’s decision to further expedite railway construction in the central and western regions to vigorously enhance

its influence and control over the market and continuously improve its profitability. In light of market layout, the segment

will deepen benchmark comparison management, speed up technology reform and upgrade on existing production lines,

promote energy conservation and emission reduction, reduce production costs and proactively promote the expansion of

the business of co-disposal of industrial waste materials and urban garbage by cement kiln. Leveraging on the favourable

policies provided by the State for “overseas expansion”, the segment will speed up its investments in overseas markets.

HIGH-TECH MATERIALS

In light of the domestic and international economic environment and the market changes, the high-tech materials

segment will continue to deepen strategy implementation and target management, strengthen innovation in various

key factors such as management, technology and business model, enhance control on product quality and production

process, in an effort to cut costs, reduce inventories and trade receivables and improve operating efficiency of assets.

The segment will adjust its production and sales strategies in a timely manner, with an aim to maintain its leading

position in the wind power fan blade and natural gas cylinder industries. The wind power fan blade business will

continue to step up efforts in new product development and increase the proportion of production and sale of large-

size fan blades, striving to maintain a higher gross profit margin of the products and promote the implementation of

internationalization strategy on a timely basis. Tapping on the favourable market opportunities, the natural gas cylinder

business will speed up the establishment of sales channels and seek for more strategic partners. Efforts will be made

to further standardize the management on the production lines of the solar-energy fused silica crucibles and other high-

tech materials, so as to enhance qualified product rate. The glass fiber and products business will continue to reduce

production costs and adjust products mix, in an effort to improve product competitiveness.

On behalf of the Board, I would like to express my heartfelt gratitude to all the shareholders, investors and customers for

your long-term support to the Company and also thank the management and all staff of the Company for their dedication

and hard work for the Group.

LIU Zhijiang

Chairman of the Board

28 March 2014

11Annual Report 2013

MANAGEMENT DISCUSSION AND ANALYSIS

BUSINESS REVIEW

Overview

The Company, being the largest cement equipment and engineering services provider in the world, as well as a leading

producer of non-metal materials in China, is principally engaged in three business segments, namely, cement equipment

and engineering services, cement and high-tech materials.


Industry Review

During the reporting period, the global economy in general showed a trend of slow recovery. There were still many

uncertainties about the future development, and competition in the international market became more intensified.

Although an overall recovery trend in the international cement project construction market was still missing, some

regional markets had shown active performance. The long term prospect of the domestic economy was positive, but

the foundation for a stabilized market with steady growth was not solid enough. Affected by excessive production

capacity, the additional cement and clinker production capacity in China recorded a growth of 94.3 million tonnes in 2013,

representing a significant decline as compared to that of 2012. The fixed asset investments in domestic cement industry

completed in 2013 amounted to RMB132.86 billion, representing a year-on-year decrease of 3.70%. The number of new

production lines in domestic cement industry was dropping rapidly year by year.

Business Review

Continuously enhancing exploitation of the international market to maintain its market shares

During the reporting period, the Company enhanced adjustment in operating strategy, shifting market exploration from

focusing on both the domestic and international markets to focusing on the international market with the domestic

market as supplement. The Company aggressively expanded overseas sales channels and made full use of the influence

of its brand name, in an effort to further explore the potential markets such as the Middle East, Southeast Asia, South

America, Europe and Africa. The amount of overseas new order intakes for the year amounted to RMB23.259 billion,

representing a year-on-year increase of 67.66%. The amount of new EPC order intakes from the international market

ranked first in terms of market share for the sixth consecutive years.

Achieving overall smooth progress in projects under construction and further improving contract

performance capability

The Company always took it as a priority to strengthen its contract performance capability and improve service

quality, and achieved remarkable results. During the reporting period, a total of twelve EPC projects have received

Final Acceptance Certificate (FAC) and eleven EPC projects have received Provisional Acceptance Certificate (PAC), in

which, the EPC project of phase II cement production line with 5,300t/d of the Silemani Cement Plant (SCP) in Iraq was

honored the “Overseas Construction Project Luban Award” by the China Construction Industry Association. Despite

many unfavorable factors, and with advanced preparation and careful planning, the EPC project of HCC5,000t/d cement

production line in Saudi Arabia was eventually completed as scheduled and was honored the “Special Contribution

Award” by the Saudi Arabia government. The excellent performance of overseas contracts helped to promote the

establishment of company brand and offered great support to boost our market competitive strength.



Enhancing cooperation to improve international operation capability

During the reporting period, the Company forged alliance with some world-known enterprises such as Lafarge to

cooperate with these companies in establishment of international brand, financing, management, talent cultivation,

technology innovation and industry complementary development, global resource allocation and international market

exploration. Focusing on improvement of the core tache of the industrial chain and achieving global resource allocation

by channeling investments overseas, the Company successfully acquired LNVT, a cement equipment and engineering

company in India, so as to realize local operation and promote exploration of the Indian market, enhancing the export and

brand influence of our cement equipment business in the Indian market.

Making new R&D achievements and continuously enhancing technical competitiveness

The Company further improved the enterprise-centered and market-oriented R&D system supported by industry,

academy and research. Strengthening collaborative innovations and conducting R&D to meet the demands of industrial

development, it has gained the R&D and manufacturing capabilities in the fields of integrated sludge disposal as well

as waste gasification technology and equipment; meanwhile, it also further accelerated the transformation of scientific

research results and effectively promoted the development of the industry. The TRMR60.4 raw materials vertical roller

mill with the largest production per hour, a product manufactured by the Company in China, passed the new product

assessment organized by China Building Materials Federation and filled the domestic blank of single raw materials

vertical roller mill with a production of 6000 to 7000 tonnes per day to support cement clinker production lines. The

crushing and grinding equipment have entered the metallurgical and mining markets.

CEMENT

Industry Review

During the reporting period, the domestic cement industry started to show a rebound trend. Although the industry

witnessed a sluggish situation in the first half of the year, it benefited from investment in fixed assets and the rapid

development of the real estate industry in the second half as well as the increasing downstream demands and recorded

an annual total production of cement of 2.42 billion tonnes, representing a year-on-year increase of 9.3%. As regards

supply, as China enhanced policy control over the cement industry and other industries with excessive production

capacity, and local governments stepped up their efforts to eliminate backward production capacity and shut down

enterprises with emissions beyond the standards, the excessive growth of production capacity was effectively curbed,

new production capacity in China further declined and the oversupply situation was mitigated. The profitability of the

industry was improved as evidenced by the whole industry’s annual profit of RMB76.6 billion, or a year-on-year increase

of 16.4%.

Business Review

Implementing prudent development strategy to respond to industry overcapacity

Facing the industry-wide overcapacity situation, the segment maintained a prudent development momentum, controlled

the investment and construction rate of new cement and commercial concrete mixing station projects, accelerated the

elimination of backward production capacity, and increased the technical transformation and optimization and upgrade

of existing production lines. During the reporting period, the production capacity of cement and commercial concrete

reached 105.88 million tonnes and 32.65 million cubic meters respectively.



Optimizing the operation capability of the segment and continuing to enhance the competitive advantage

Focusing on operational optimization, this segment continuously carried out management optimization and technical

innovations for the existing production lines, improved the performance indicators of the production lines, and constantly

reduced the product manufacturing costs of the segment. During the reporting period, the costs per tonne of cement

fell by 10% as compared to the previous year, and standard coal consumption per tonne of clinker fell by 0.8 kilogram

as compared to the previous year. As the product costs continued to decline, the competitive advantage of the segment

was enhanced. As the overall environment of the industry became positive, the segment recorded a significant growth

as compared to the previous year.

Continuing to implement the strategy of energy conservation and emission reduction and fulfilling

corporate social responsibility

The segment was always committed to energy conservation and emission reduction of cement production lines, and

continued to earnestly fulfill corporate social responsibility. During the reporting period, the segment invested in the

construction of waste heat power generation capacity of 55.5MW, the installed capacity totaled 348.5MW, and the

accumulated power generation for the year reached 1,528.488 million kwh, reducing 1.3718 million tonnes of carbon

dioxide emission; in accordance with the new standards concerning nitrogen oxides emissions from the cement industry

issued by the Ministry of Environmental Protection of the People’s Republic of China, the segment continued to build

supportive denitrification systems for cement clinker production lines. So far, over 50% of the production lines have run

the denitrification systems.

HIGH-TECH MATERIALS

Industry Review

During the reporting period, the global economy recorded slow recovery. Except for the wind power fan blade industry

which presented a rebound trend, the other industries were exposed to sluggish markets and intensifying competitions.

The wind power fan blade industry witnessed overall improvement as the State Grid launched several projects to

promote wind power grid integration, which continuously optimized the layout of wind power development and mitigated

the “abandoning wind power” scenario to some extent. In 2013, the newly installed capacity of China’s wind power

industry amounted to approximately 16.1GW, representing a year-on-year increase of 24%. The CNG cylinder industry

was exposed to intensifying market competitions at home and abroad, and the demand for natural gas at the domestic

market dropped due to the increase of price; as regards the overseas markets, while the new cylinder factories in

China, India and other countries commenced production, the demands from the traditional consumption countries

(Pakistan, Thailand, Uzbekistan, etc.) dropped significantly due to policies and gas prices, resulting in increasingly heated

competitions. The situation of the domestic and overseas markets of the glass fiber industry was more severe and

complicated than 2012 as the growth rate of domestic economy slowed down and the downstream enterprises of the

glass fibre composite materials industry chain faced overall depression. 2013 was the most depressed year for electronic

yarn and electronic glass fabrics in the history. The glass roving, yarn and electronic glass fabric products recorded

industry-wide loss; as regards the overseas markets, the U.S. and Japan markets remained relatively stable, but their

growth was limited; the consumption volume of glass fibers in Middle East was similar to that of 2012 and only half of

that of 2008; the Indian market remained subdued; Europe was still at low ebb. The solar-energy fused silica crucibles

industry picked up slightly, but has not got completely out of the trouble.



Business Review

Strengthening technical innovations and driving quality improvement and cost control

During the reporting period, leveraging on the advantages of sophisticated R&D platform and the super R&D team, the

high-tech materials segment continuously strengthened technical innovations, kept optimizing the production process,

improved labor productivity, improved product performance and cut down overall costs. In particular, the average sales

costs of wind power fan blades decreased by 10.80% while the gross margin increased by 3.17 percentage points as

compared with the previous year respectively. The average sales costs of CNG cylinders decreased by 1.12% while the

gross margin increased by 3.14 percentage points as compared with the previous year respectively.

Enhancing the management of inventory and accounts receivable and improving efficiency of fund application

During the reporting period, the high-tech materials segment continuously strengthened the management of the

enterprise’s inventory and accounts receivable, tried to reduce the proportions of inventory and accounts receivable to

income, cut down the funds taken up and reduced operational risks. The proportion of inventory to turnover dropped by

5 percentage points while the proportion of accounts receivable to turnover dropped by 3 percentage points.

Optimizing customer management and developing the market in a comprehensive way

During the reporting period, the high-tech materials segment continued to optimize customer management by

implementing classified management of customers. While retaining old customers, the segment continuously explored

new customers. Each key product has realized customer diversification, thus avoiding the risks due to a single customer

and increasing the market share at the same time. The production and sales volume of wind power fan blades continued

to lead the domestic market. The sales volume of cylinder also achieved relatively big growth.



FINANCIAL REVIEW

Year ended

31 December

2013

Year ended

31 December

2012 Change

RMB million RMB million RMB million %

(Restated)

Turnover 52,081.32 46,187.07 5,894.25 12.76

Cost of sales (42,069.19) (37,829.05) (4,240.14) 11.21

Gross profit 10,012.13 8,358.02 1,654.11 19.79

Other gains 1,391.84 1,452.56 (60.72) (4.18)

Selling and marketing expenses (1,822.56) (1,553.64) (268.92) 17.31

Administrative expenses (5,450.37) (4,651.29) (799.08) 17.18

Exchange (loss) gain (85.26) 1.69 (86.95) (5,144.97)

Other expenses (53.32) (31.81) (21.51) 67.62

Operating profit 3,992.46 3,575.53 416.93 11.66

Interest income 139.25 170.09 (30.84) (18.13)

Finance costs (1,961.95) (1,683.51) (278.44) 16.54

Share of results of associates 66.35 7.37 58.98 800.27

Share of results of joint ventures (27.27) (10.67) (16.60) 155.58

Profit before tax 2,208.84 2,058.80 150.04 7.29

Income tax expense (743.43) (512.96) (230.47) 44.93

Profit for the year 1,465.41 1,545.84 (80.43) (5.20)

Profit for the year attributable to:

Owners of the Company 397.51 452.29 (54.78) (12.11)

Non-controlling interests 1,067.90 1,093.55 (25.65) (2.35)

Dividends 71.43 107.14

Results Performance

During the reporting period, profit before tax of the Group was RMB2,208.84 million, representing a year-on-year increase

of 7.29%. Profit for the year attributable to owners of the Company was RMB397.51 million, representing a year-on-year

decrease of 12.11%. Earnings per share of the Company was RMB0.11.

Consolidated Operating Results

The financial information for the segments presented below is before elimination of inter-segment transactions and

before unallocated expenses.

Turnover

Turnover of the Group in 2013 was RMB52,081.32 million, representing an increase of 12.76% as compared with

RMB46,187.07 million in 2012. The increase was mainly due to the increase in the turnover of the cement segment.

In particular, turnover of the cement equipment and engineering services segment, cement segment and high-tech

materials segment decreased by RMB316.77 million, increased by RMB3,906.87 million and increased by RMB807.26

million, respectively.



Cost of Sales

Cost of sales of the Group in 2013 was RMB42,069.19 million, representing an increase of 11.21% as compared with

RMB37,829.05 million in 2012. The increase was mainly due to the increase in product sales volume of the cement

segment. In particular, cost of sales of the cement equipment and engineering services segment, cement segment

and high-tech materials segment increased by RMB150.74 million, increased by RMB2,043.69 million and increased by

RMB680.95 million, respectively.

Gross Profit and Gross Margin

Gross profit of the Group in 2013 was RMB10,012.13 million, representing an increase of 19.79% as compared with

RMB8,358.02 million in 2012. In particular, gross profit of the cement equipment and engineering services segment,

cement segment and high-tech materials segment decreased by RMB467.51 million, increased by RMB1,863.18 million

and increased by RMB126.31 million, respectively.

Gross margin of the Group in 2013 was 19.22%, representing an increase of 1.12 percentage points as compared with

18.10% in 2012.

Other Gains

Other gains of the Group in 2013 were RMB1,391.84 million, representing a decrease of 4.18% as compared with

RMB1,452.56 million in 2012 which was mainly due to the decrease in gains from disposal of long-term equities.

Selling and Marketing Expenses

Selling and marketing expenses of the Group in 2013 were RMB1,822.56 million, representing an increase of 17.31% as

compared with RMB1,553.64 million in 2012. The increase was mainly due to the increase in product sales volume of

the cement segment. In particular, selling and marketing expenses of the cement equipment and engineering services

segment, cement segment and high-tech materials segment increased by RMB13.97 million, increased by RMB217.51

million and increased by RMB37.45 million, respectively.

Administrative Expenses

Administrative expenses of the Group in 2013 were RMB5,450.37 million, representing an increase of 17.18% as

compared with RMB4,651.29 million in 2012. The increase was mainly due to the significant increase in impairment loss

recognised in respect of assets. In particular, administrative expenses of the cement equipment and engineering services

segment, cement segment and high-tech materials segment increased by RMB279.16 million, increased by RMB520.15

million and increased by RMB12.89 million, respectively.

Exchange (Loss) Gain

Exchange loss of the Group in 2013 was RMB85.26 million, representing a decrease of 5,144.97% as compared with the

exchange gain of RMB1.69 million in 2012. The decrease was mainly due to the large amount of deposits denominated

in foreign currency held by the Group and the appreciation of the RMB during the period.

Other Expenses

Other expenses of the Group in 2013 were RMB53.32 million, representing an increase of 67.62% as compared with

RMB31.81 million in 2012. The increase was mainly due to the increase in loss from the disposal of fixed assets.



Operating Profit and Operating Profit Margin

Operating profit of the Group in 2013 was RMB3,992.46 million, representing an increase of 11.66% as compared with

RMB3,575.53 million in 2012. In particular, operating profit of the cement equipment and engineering services segment,

cement segment and high-tech materials segment decreased by RMB761.25 million, increased by RMB1,175.64 million

and decreased by RMB139.98 million, respectively.

Operating profit margin in 2013 was 7.67%, representing a decrease of 0.07 percentage point as compared with 7.74%

in 2012.

Interest Income

Interest income of the Group in 2013 was RMB139.25 million, representing a decrease of 18.13% as compared with

RMB170.09 million in 2012.

Finance Costs

Finance costs of the Group in 2013 were RMB1,961.95 million, representing an increase of 16.54% as compared with

RMB1,683.51 million in 2012. The increase was mainly due to the expansion of the scale of financing.

Share of Results of Associates

Share of results of associates of the Group in 2013 was RMB66.35 million, representing an increase of 800.27% as

compared with RMB7.37 million in 2012. The increase was mainly due to the increase of the results of some associates

and the disposal of some loss-making associates during the period.

Share of Results of Joint Ventures

Share of results of joint ventures of the Group in 2013 was a loss of RMB27.27 million, representing an increase of

155.58% as compared with a loss of RMB10.67 million in 2012. The increase was mainly due to the increase of losses

made by some joint ventures during the period.

Income Tax Expense

Income tax expense of the Group in 2013 was RMB743.43 million, representing an increase of 44.93% as compared

with RMB512.96 million in 2012, mainly due to the significant growth in the result of the cement segment during the

period as compared with the corresponding period of last year.

Profit for the Year Attributable to Non-controlling Interests

Profit for the year attributable to non-controlling interests of the Group in 2013 was RMB1,067.90 million, representing a

decrease of 2.35% as compared with RMB1,093.55 million in 2012.

Profit for the Year Attributable to Owners of the Company

Based on the above, profit for the year attributable to owners of the Company in 2013 was RMB397.51 million,

representing a decrease of 12.11% as compared with RMB452.29 million in 2012.

Segment Results

The financial information for each segment presented below is before elimination of inter-segment transaction and before

unallocated expenses.



Cement Equipment and Engineering Services

2013 2012 Change

RMB million RMB million %

(Restated)

Turnover 22,668.36 22,985.13 (1.38)

Cost of sales 19,611.94 19,461.20 0.77

Gross profit 3,056.42 3,523.93 (13.27)

Selling and marketing expenses 190.81 176.84 7.90

Administrative expenses 2,380.65 2,101.49 13.28

Segment results 541.09 1,302.34 (58.45)

Turnover

Turnover of the cement equipment and engineering services segment in 2013 was RMB22,668.36 million, representing

a decrease of 1.38% as compared with RMB22,985.13 million in 2012. The decrease was mainly due to the significant

decrease in sales revenue of trading.

Cost of Sales

Cost of sales of the cement equipment and engineering services segment in 2013 was RMB19,611.94 million,

representing an increase of 0.77% as compared with RMB19,461.20 million in 2012, mainly due to the increase in

business volume of the main businesses.


Gross profit of the cement equipment and engineering services segment in 2013 was RMB3,056.42 million, representing

a decrease of 13.27% as compared with RMB3,523.93 million in 2012. Gross margin of the cement equipment and

engineering services segment decreased by 1.85 percentage points from 15.33% in 2012 to 13.48% in 2013. The

decrease was mainly attributable to the decrease in contract price due to severe market competition.


Selling and marketing expenses of the cement equipment and engineering services segment in 2013 were RMB190.81

million, representing an increase of 7.90% as compared with RMB176.84 million in 2012, mainly due to the increase in

labor costs.


Administrative expenses of the cement equipment and engineering services segment in 2013 were RMB2,380.65 million,

representing an increase of 13.28% as compared with RMB2,101.49 million in 2012. The increase was mainly due to the

significant increase in impairment loss.

Segment Results

Based on the above, results of the cement equipment and engineering services segment in 2013 were RMB541.09

million, representing a decrease of 58.45% as compared with RMB1,302.34 million in 2012.



Cement

2013 2012 Change


Turnover 24,451.88 20,545.01 19.02

Cost of sales 18,763.64 16,719.95 12.22

Gross profit 5,688.24 3,825.06 48.71

Selling and marketing expenses 1,284.20 1,066.69 20.39

Administrative expenses 2,142.10 1,621.95 32.07

Segment results 3,079.68 1,904.04 61.74

Turnover

Turnover of the cement segment in 2013 was RMB24,451.88 million, representing an increase of 19.02% as compared

with RMB20,545.01 million in 2012. The increase was mainly due to the increase in product sales volume.

Cost of Sales

Cost of sales of the cement segment in 2013 was RMB18,763.64 million, representing an increase of 12.22% as

compared with RMB16,719.95 million in 2012. The increase was mainly due to the increase in product sales volume.


Gross profit of the cement segment in 2013 was RMB5,688.24 million, representing an increase of 48.71% as compared

with RMB3,825.06 million in 2012. Gross margin of the cement segment increased by 4.64 percentage points from

18.62% in 2012 to 23.26% in 2013. The increase was mainly due to the decrease in unit production costs.


Selling and marketing expenses of the cement segment in 2013 were RMB1,284.20 million, representing an increase

of 20.39% as compared with RMB1,066.69 million in 2012. The increase was mainly due to the significant increase in

packaging and transportation costs as a result of the increase in product sales volume.


Administrative expenses of the cement segment in 2013 were RMB2,142.10 million, representing an increase of 32.07%

as compared with RMB1,621.95 million in 2012. The increase was mainly due to the increase in impairment loss of

assets and the increase in administrative expenses as a result of increase in the production capacity.

Segment Results

Based on the above, results of the cement segment in 2013 were RMB3,079.68 million, representing an increase of

61.74% as compared with RMB1,904.04 million in 2012.



High-tech Materials

2013 2012 Change


(Restated)

Turnover 6,802.69 5,995.43 13.46

Cost of sales 5,341.12 4,660.17 14.61

Gross profit 1,461.57 1,335.26 9.46

Selling and marketing expenses 347.56 310.11 12.08

Administrative expenses 868.56 855.67 1.51

Segment results 589.04 729.02 (19.20)

Turnover

Turnover of the high-tech materials segment in 2013 was RMB6,802.69 million, representing an increase of 13.46% as

compared with RMB5,995.43 million in 2012. The increase was mainly due to the increase in sales volume of the major

products.

Cost of Sales

Cost of sales of the high-tech materials segment in 2013 was RMB5,341.12 million, representing an increase of 14.61%

as compared with RMB4,660.17 million in 2012. The increase was mainly due to the increase in sales volume of the

major products.


Gross profit of the high-tech materials segment in 2013 was RMB1,461.57 million, representing an increase of 9.46%

as compared with RMB1,335.26 million in 2012. Gross margin of the high-tech materials segment decreased by 0.78

percentage point from 22.27% in 2012 to 21.49% in 2013. The decrease was mainly due to the decrease in the gross

margin of the fiberglass products.


Selling and marketing expenses of the high-tech materials segment in 2013 were RMB347.56 million, representing an

increase of 12.08% as compared with RMB310.11 million in 2012. The increase was mainly due to the increase of the

transportation costs.


Administrative expenses of the high-tech materials segment in 2013 were RMB868.56 million, representing an increase

of 1.51% as compared with RMB855.67 million in 2012.

Segment Results

Based on the above, results of the high-tech materials segment in 2013 were RMB589.04 million, representing a

decrease of 19.20% as compared with RMB729.02 million in 2012.



Liquidity and Capital Resources

Cash flows:

2013 2012

RMB million RMB million

(Restated)

Net cash from operating activities 496.93 1,592.36

Net cash used in investing activities (2,891.54) (5,743.77)

Net cash from financing activities 474.48 3,103.93

Cash and cash equivalents at the end of the year 7,270.06 9,235.27

Net cash from operating activities

Net cash from operating activities decreased from RMB1,592.36 million in 2012 to RMB496.93 million in 2013. The

decrease was mainly due to the increase in trade and other receivables.

Net cash used in investing activities

Net cash used in investing activities decreased from RMB5,743.77 million in 2012 to RMB2,891.54 million in 2013. The

decrease was mainly due to the decrease in the investment in fixed assets.

Net cash from financing activities

Net cash from financing activities decreased from RMB3,103.93 million in 2012 to RMB474.48 million in 2013. The

decrease was mainly due to the decrease in equity finance on a year-on-year basis.

Working Capital

As at 31 December 2013, the Group’s cash and cash equivalents amounted to RMB7,270.06 million (2012: RMB9,235.27

million). Unutilised bank credit facilities amounted to RMB30,125.71 million (2012: RMB31,172.86 million). The current

ratio (calculated by dividing the total current assets by the total current liabilities) of the Group as at 31 December 2013

decreased to 82.28% (2012: 88.18%).

The Group monitors its capital status on the basis of the net debt ratio which is calculated as net debt divided by total

capital. Net debt is calculated as the total amount of interest-bearing debts (including current and non-current borrowings,

short-term financing bills, medium-term notes and corporate bonds as shown in the consolidated statement of financial

position) less restricted bank balances and bank balances and cash. As at 31 December 2013, the net debt ratio of the

Group was 94.74% (2012: 80.46%).

With stable cash inflow from daily operating activities as well as existing unutilised bank credit facilities, the Group has

sufficient financing resources for its future expansion.



Borrowings

As at 31 December 2013, the balance of the Group’s borrowings amounted to RMB35,337.37 million.

31 December

2013

31 December

2012

RMB million RMB million

(Restated)

Short-term borrowings and long-term borrowings due within one year 16,257.82 15,749.45

Short-term financing bills 2,900.00 400.00

Long-term borrowings, net of portions due within one year 7,931.43 9,280.60

Corporate bonds 2,492.78 2,490.24

Medium-term notes 5,755.34 5,253.61

Total borrowings 35,337.37 33,173.90

Net Current Liabilities

As at 31 December 2013, the net current liabilities of the Group was approximately RMB8,587.84 million, representing an

increase of RMB3,629.52 million as compared with the net current liabilities of RMB4,958.32 million as at 31 December

2012. The increase was mainly due to the increase in the short-term borrowings, short-term financing bills and trade and

other payables.

Inventory Analysis

As at 31 December 2013, the inventory of the Group was approximately RMB8,773.28 million, representing an increase

of RMB379.93 million as compared with RMB8,393.35 million as at 31 December 2012. The inventory turnover days

decreased from 78.63 days in 2012 to 73.45 days in 2013.

Trade Receivables

As at 31 December 2013, the Group’s trade receivables was approximately RMB12,497.38 million, representing an

increase of RMB2,125.83 million as compared with the trade receivables of RMB10,371.55 million as at 31 December

2012. In 2013, the average turnover days of trade receivables of the Group increased by 5.17 days from 73.87 days in

2012 to 79.04 days in 2013, which was due to the longer turnover day of the receivables of the commercial concrete

products and the increase in its sales volume.

Contract Work-in-Progress

As at 31 December 2013, the Group’s contract work-in-progress was approximately RMB255.94 million (as at 31

December 2012: RMB270.03 million).

Pledge of Assets

The Group’s property, plant and equipment, and prepaid lease payments with carrying values of RMB1,079.59 million

and RMB49.33 million respectively as at 31 December 2013 were pledged as security (31 December 2012: RMB3,305.17

million and RMB107.38 million respectively).



Contingent Liabilities

2013 2012

RMB’000 RMB’000

Outstanding guarantees – 30,000

Total – 30,000

Material Investment

On 21 June 2013, Ningxia Building Materials, a non-wholly owned subsidiary of the Company, and XSGF entered into an

equity transfer agreement, pursuant to which Ningxia Building Materials agreed to acquire 55% equity interest in WXC

held by XSGF for a cash consideration of RMB264,110,000. The transaction was completed on 5 July 2013, and WXC

became a wholly-owned subsidiary of Ningxia Building Materials and an indirect subsidiary of the Company. Details of

the transaction are set out in the announcement of the Company dated 21 June 2013 on the websites of the Hong Kong

Stock Exchange and the Company.

On 30 August 2013, CBMI Construction, an indirect subsidiary of the Company, entered into an equity transfer agreement

with Tianjin Company and Tianlianhai Company, pursuant to which CBMI Construction agreed to acquire 100% equity

interest in Zhongke Hongsheng, 80% of which from Tianjin Company and 20% of which from Tianlianhai Company, for a

total consideration of RMB253,900,000. The acquisition was completed on 12 September 2013, and Zhongke Hongsheng

became a wholly-owned subsidiary of CBMI Construction and an indirect subsidiary of the Company. Details of the

transaction are set out in the announcement of the Company dated 30 August 2013 on the websites of the Hong Kong


On 30 August 2013, Sinoma International, a non-wholly owned subsidiary of the Company, entered into a share purchase

agreement with SK (a German company), pursuant to which Sinoma International could obtain the 59.09% equity interest

in Hazemag & EPR GmbH held by SK through acquisition and additional capital contribution. In accordance with the

agreement, the transaction was executed by two steps. As the agreement contained conditions precedent clause, the

agreement might or might not take effect and be executed. Currently, Sinoma International is implementing relevant

approval or filing procedures with the domestic authorities. Details of the transaction are set out in the announcements

of the Company dated 2 September, 24 September and 30 October 2013 respectively on the websites of the Hong Kong


On 13 September 2013, Qilianshan Co., a non-wholly owned subsidiary of the Company, entered into an equity transfer

agreement with all the former shareholders of Runji Cement, pursuant to which Qilianshan Co. acquired 100% equity

interests in Runji Cement from the former shareholders of Runji Cement for a total consideration of RMB265,594,600.

The acquisition was completed on 1 November 2013, and Runji Cement became a wholly-owned subsidiary of Qilianshan

Co. and an indirect subsidiary of the Company. Details of the transaction are set out in the announcement of the

Company dated 13 September 2013 on the websites of the Hong Kong Stock Exchange and the Company.

Save as disclosed above, the Company did not make any other material investment during the reporting period.



Material Acquisitions and Disposals of Assets

Save the relevant acquisitions as disclosed in the above section headed “Material Investment”, the Company did not

have any material acquisition or disposal of assets in respect of its subsidiaries and associates during the reporting

period.

Market Risks

The Company is exposed to various types of market risks in the normal course of its business, including contract risk,

foreign exchange risk, interest risk and raw materials and energy price risk.

Contract Risks

The international business accounts for a larger proportion in the Company’s cement equipment and engineering services

businesses, with a long construction period. Furthermore, in respect of the overseas contracts, under the impacts of

uncontrollable factors such as the global environment and political and economic conditions of the place of contract

performance, certain projects may have the risks of being deferred, modified or terminated.

During the reporting period, the Company further enhanced the management of contract risks, standardized contract

terms of new order intakes and improved the execution ability of contracts. The Company cleared out the contracts at

hand and had carried out risk prevention plan. For the projects under construction, the Company enhanced assessment

of the default in payment of project owners, paid close attention to the project owners’ credit status, and conduct

periodic settlement for projects in time. For delay and suspension in the construction of the related projects, the

Company actively communicated with the project owners to avoid losses. The Company will continue to strengthen the

above measures in the future to effectively address the contract risks.

Foreign Exchange Risks

The Group conducts its domestic business primarily in RMB, which is also its functional currency. However, overseas

engineering projects and export of products are denominated in foreign currencies, primarily US dollars and Euro.

Therefore, the Group bears the risks of fluctuations of exchange rate to a certain extent.

Interest Rate Risks

The Group raises borrowings to support general corporate purposes, including capital expenditures and working capital

needs. The interest rate of the borrowings is subject to adjustment by its lenders in accordance with changes of the

regulations of the People’s Bank of China. Therefore, the Group bears the risks arising from the fluctuations in the

interest rate of the borrowings.

Raw Materials and Energy Price Risks

The Company mainly consumes raw materials and energy resources, such as steel, coal, electricity and natural gas, the

price fluctuation of which has a significant impact on the cost of the Company.


BIOGRAPHY OF DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

EXECUTIVE DIRECTORS

LIU Zhijiang, aged 56, has been an executive Director and chairman of the Board since February 2013. Prior to that,

Mr. Liu served as a non-executive Director from July 2007 to February 2013. He has over 30 years of experience in the

PRC non-metal materials industry and served a number of key positions in Tianjin Cement Industry Design & Research

Institute from August 1982 to May 2005, such as deputy head and head of the institute. He served as a deputy general

manager of the Parent from May 2005 to May 2009; a director and general manager of the Parent from May 2009 to

January 2013, and has been appointed as the chairman of the Parent since January 2013. Mr. Liu has been serving

as a director of two A share-listed companies, namely Sinoma International and Tianshan Cement, since April 2006

and January 2014, respectively, and served as the chairman of the board of Sinoma International from April 2006 to

December 2009. Mr. Liu is entitled to a special government allowance provided by the State Council. He was awarded as

Provincial Young and Middle Aged Expert with Important Contribution (省部級有重要貢獻的中青年專家), China Engineering

Design Master and was included in the first group of national candidates for the New Century Hundred-Thousand-

Ten Thousand Talents Project (新世紀百千萬人才工程國家級人選). Mr. Liu also serves various positions such as the

vice president of China Building Materials Federation (中國建築材料聯合會) and the president of China Building Material

Construction Association (中國建材工程建設協會). Mr. Liu graduated from South China University of Technology (華南理工大學) in July 1982, majoring in binding materials. He is a professorate senior engineer.

LI Xinhua, aged 49, is an executive Director and president of the Company and has been the vice chairman of the Board

since February 2013. He served as a vice president of the Company from July 2007 to October 2009. He has been

serving as an executive Director since December 2009; vice chairman of the Board from December 2009 to May 2011,

and president of the Company since January 2011. Mr. Li has over 25 years of experience in the non-metal materials

industry. Mr. Li has served various key positions, such as vice president and president in Beijing FRP Research and

Design Institute (北京玻璃鋼研究設計院), currently a subsidiary of the Parent, from August 1985 to March 2002. Mr. Li

was the chairman of the board of Sinoma Science & Technology, an A share-listed company, from May 2003 to May

2013, and served as the president of Sinoma Science & Technology from October 2009 to August 2010. Mr. Li has been

serving as a director of the Parent since January 2013 and has served as a general manager of the Parent since February

2013. From May 2011 to October 2012, he served as a director of BBMG Corporation. He has also been serving as

director of four listed companies, namely, Sinoma Science & Technology, Qilianshan Co., Sinoma International and

Ningxia Building Materials, since May 2003, June 2011, July 2011 and December 2011, respectively, and as a director of

Sinoma Finance since April 2013. Mr. Li is a National Young and Middle Aged Expert with Important Contribution (國家有突出貢獻的中青年專家) and is entitled to a special government allowance provided by the State Council. Mr. Li currently

serves as the vice president of China Building Materials Federation (中國建築材料聯合會), the vice president of Chinese

Society for Composite Material (中國複合材料學會), and the vice chairman of Chinese Ceramic Society (中國硅酸鹽學會).

Mr. Li graduated with a bachelor’s degree in chemistry from Shandong Institute of Building Materials (山東建材學院) in

July 1985. He is a professorate senior engineer.



NON-EXECUTIVE DIRECTORS

YU Shiliang, aged 59, re-designated as a non-executive Director since February 2013. Mr. Yu served as an executive

Director and president of the Company from July 2007 to March 2009, and then was re-designated as a non-executive

Director and ceased to be the president of the Company since March 2009. From May 2011 to September 2012, he

served as the vice chairman of the Board, and was appointed as an executive Director and chairman of the Board from

September 2012 to February 2013. Mr. Yu has worked over 30 years in the non-metal materials industry. Mr. Yu has

held various positions in State Bureau of Building Materials Industry Xianyang Research & Design Institute of Ceramics

(國家建材局咸陽陶瓷研究設計院), such as the deputy head and head of the institute from July 1980 to April 1995 and

served as the head of State Building Materials Bureau Synthetic Crystals Research Institute (國家建材局人工晶體研究所), currently a subsidiary of the Parent, from April 1995 to April 1997. Mr. Yu served as the general manager of the

Parent from April 1997 to October 2000 and served as the deputy general manager of the Parent from October 2002 to

November 2007 and has been serving as the vice chairman of the board of the Parent since May 2009. Mr. Yu served

as a director of Sinoma Science & Technology, a listed company, from December 2001 to December 2004 and has been

serving as its director since March 2008, as a director of BBMG Corporation, a listed company, since October 2012 and

as a director of Sinoma Finance since April 2013. Mr. Yu was entitled to a special government allowance provided by the

State Council. In 2006, he was awarded the fifth National Outstanding Entrepreneur in Innovation. Mr. Yu was elected

as the representative to the 16th and 17th National People’s Congress of Chinese Communist Party. He graduated

from Nanjing University of Technology (南京工業大學) in August 1978, majoring in ceramics. He is a professorate senior

engineer.

ZHANG Hai, aged 55, is a non-executive Director. Mr. Zhang has been serving as the deputy general manager of the

Parent since January 1996, and the secretary to the board of the Parent since May 2009. Mr. Zhang served various

positions in different departments of the State Bureau of Building Materials Industry from August 1982 to January 1996,

including a technician in the Beijing FRP Research and Design Institute (北京玻璃鋼研究所), the principal staff member,

the deputy division head, the division head of the personnel department and the director of the office of the Party

leadership group. Equipped with over 30 years of experience in the PRC non-metal materials industry, Mr. Zhang is

entitled to a special government allowance provided by the State Council. Mr. Zhang graduated with a doctoral degree

in economics from Wuhan University of Technology (武漢理工大學) in December 2007. He is a professorate senior

engineer.

LI Jianlun, aged 56, has been a non-executive Director since July 2013. Mr. Li has served as the vice general manager

of the Parent since April 1997 and as the director of the China Construction Materials and Geological Prospecting Center

(中國建築材料工業地質勘查中心), currently a subsidiary body of the Parent, since September 2007. Mr. Li had served in

China Construction Materials and Geological Prospecting Center at several positions such as the division head of the

personnel division, the division head of the planning division, and the assistant to director from July 1982 to April 1997,

served as the director of our predecessor, China National Non-Metallic Materials Corporation from February 2002 to July

2007 and also served as the director of Tianshan Cement from October 2005 to December 2011. Mr. Li graduated from

the Department of Economics and Management of Hebei Geological Institute with a bachelor’s degree in August 1982.

Mr. Li is a senior economist.



YU Guobo, aged 57, has been a non-executive Director since July 2013. Mr. Yu has served as the vice general manager

of the Parent since November 1998. Mr. Yu had served in Shandong Industrial Ceramics Research and Design Institute

(山東工業陶瓷研究設計院) at several positions such as engineer, vice director and director of research office, vice head

and head of the institute from January 1982 to November 1997, and during this period, Mr. Yu was accredited at Italian

WELKO Company as the engineer from October 1988 to October 1989. Mr. Yu had served as the vice general manager

of China Inorganic Materials Technology Industrial Company (中國無機材料科技實業公司) from November 1996 to

November 1998. Mr. Yu graduated from Wuhan University of Technology (武漢理工大學) with a doctor’s degree majoring

in information management in December 2007. Mr. Yu is a professorate senior engineer and is entitled to a special

government allowance provided by the State Council.

TANG Baoqi, aged 54, is a non-executive Director. Mr. Tang has over 30 years of experience in the banking industry and

financial industry. Mr. Tang served in various departments in the headquarters of China Construction Bank from August

1983 to June 1999, including the transportation division in the second investment department, the non-industrial division

in the investment department, the reserve loan division in the second credit department, the electrical, mechanical and

textile division in the credit department and in the planning and finance division in the business department. Mr. Tang

served in the debt management department of China Cinda Asset Management Co., Ltd. from June 1999 to February

2000. Mr. Tang served as the general manager in asset management department of Well Kent International Investment

Company Limited from February 2000 to April 2006. From April 2006 to April 2011, Mr. Tang has served as the chief

financial officer of Well Kent International Investment Company Limited. Since April 2011, Mr. Tang has served as the

vice president of Well Kent International Investment Company Limited. Mr. Tang graduated with a bachelor’s degree in

economics from the Infrastructure Finance and Credit Faculty of Hubei Institute of Finance and Economics (湖北財經學院)

in August 1983. He is also qualified as a senior economist.

INDEPENDENT NON-EXECUTIVE DIRECTORS

LEUNG Chong Shun, aged 48, is an independent non-executive Director. Mr. Leung has been serving as an independent

non-executive director of Lijun International Pharmaceutical (Holding) Co., Ltd (利君國際醫藥（控股）有限公司) since

October 2005 and an independent non-executive director of China Communications Construction Company Ltd. (中國交通建設股份有限公司) since January 2011, and served as an independent non-executive director of China Metal Recycling

(Holdings) Limited from May 2009 to August 2013. Mr. Leung is a partner of Woo Kwan, Lee & Lo. (胡關李羅律師行), a

reputable law firm based in Hong Kong. Mr. Leung became a practicing lawyer since 1991. Mr. Leung graduated from

the University of Hong Kong in November 1988 where he obtained a bachelor’s degree of Laws with honours and is

qualified as a solicitor in both Hong Kong and England.

LU Zhengfei, aged 50, is an independent non-executive Director. Mr. Lu is currently an associate dean, a professor and

a supervisor of doctoral students with Guanghua School of Management of the Peking University (北京大學光華管理學院). He is also a consultant to the China Accounting Standards Committee of the Ministry of Finance of the PRC (財政部會計準則委員會), an executive director and academic committee member of the Accounting Society of China (中國會計學會), an executive member of the Standing Committee of the China Audit Society (中國審計學會), and a guest

editor of Accounting Research (《會計研究》) and Audit Research (《審計研究》). Mr. Lu has over 20 years of experience in

the accounting industry and therefore has gained extensive operational and managerial experience as well as profound

knowledge of this field. Mr. Lu served as an independent non-executive director of PICC Property and Casualty Company

Limited (中國人民財產保險股份有限公司) from February 2004 to January 2011 and has been serving as an independent

supervisor of such company since January 2011. Mr. Lu has been an independent non-executive director of Sinotrans

Limited (中國外運股份有限公司) since September 2004, an independent non-executive director of Sino Biopharmaceutical

Limited (中國生物制藥有限公司) since November 2005, an independent non-executive director of Lian Life Insurance



Company, Ltd (利安人壽保險股份有限公司) since May 2011, an independent non-executive director of Mit Automobile

Service Co., Ltd. (an unlisted company) since February 2012 and an independent non-executive director of Bank of China

Limited since July 2013. Mr. Lu was selected as one of the “Top 100 Talents Program (百人工程)” in social science

theories in Beijing in 2001 and one of the “New Century Excellent Scholarship Program (新世紀優秀人才支持計劃)”

of the Ministry of Education of the PRC (中國教育部) in 2005. Mr. Lu graduated with a doctoral degree in economics

from Nanjing University (南京大學) in June 1996 and completed the post-doctoral research in economics (accounting) at

Renmin University of China (中國人民大學).

WANG Shimin, aged 65, is an independent non-executive Director. Mr. Wang served in the Supreme People’s Court

of the PRC (最高人民法院) from 1980 to 2008, during which he served various key positions, such as the deputy chief

of National Judges College (國家法官學院), the deputy chief of Administration in General Office (辦公廳) of the Supreme

People’s Court and the chief of Bureau of Justice and Material Administration (司法行政裝備管理局). Mr. Wang graduated

with a second bachelor’s degree in law from University of Science and Technology Beijing (北京科技大學). He is currently

a professor at National Judges College.

ZHOU Zude, aged 68, is an independent non-executive Director. Mr. Zhou is the Chief Professor and supervisor of

doctoral students of the School of Mechanical and Electronic Engineering of Wuhan University of Technology (武漢理工大學), a director of the key laboratory of digital manufacturing in Hubei Province (湖北省數字製造重點實驗室) and

a chair professor in mechatronics. Mr. Zhou held various positions, such as the lecturer and researcher director of

electric engineering faculty of Huazhong University of Science and Technology (華中理工大學), the deputy professor and

professor of Mechanical Engineering Faculty Department of Huazhong University of Science and Technology, the vice

president of Huazhong University of Science and Technology, the visiting professor of University of Bolton and National

University of Singapore, from July 1970 to May 2000. From May 2000 to June 2010, Mr. Zhou served as the president of

Wuhan University of Technology. Mr. Zhou is a senior member of Chinese Mechanical Engineering Society and American

Mechanical Engineering Society. Mr. Zhou is also the chief editor of the magazine “Digital Manufacture Science (《數字製造科學》)” and the journal of natural science of Wuhan University of Technology, the director of the International

Academy for Production Engineering (國際生產工程學會), the deputy chief editor of the magazine “International Biological

Mechanics and Electric and Mechanical Engineering Integration (《國際生物機械與機電一體化》)” and a member of the

editors of the magazine “International Vibration and Noises (《國際振動與噪聲》)”. Mr. Zhou is also the vice chairman

of the fourth board of the Chinese Mechanical Engineering Magazine Agency. Mr. Zhou graduated from Huazhong

University of Science and Technology in July 1970 and majored in electric system automation. Mr. Zhou also attended

advanced studies at the University of Birmingham.

SUPERVISORS

XU Weibing, aged 54, is the chairman of the Supervisory Committee of the Company. Ms. Xu has been serving as the

chief accountant of the Parent since October 2000 and served as the deputy general manager of our predecessor, China

National Non-Metallic Materials Corporation from 2005 to July 2007. Ms. Xu has over 25 years of working experience

in financial accounting and capital operation. She joined the Parent in 1989 and has served various key accounting and

financial positions. Ms. Xu has been a supervisor of Sinoma Science & Technology (an A share-listed company) since

December 2001 and also the chairman of Sinoma Finance since April 2013. Ms. Xu is entitled to a special government

allowance provided by the State Council. She also serves as the committee member of China Association of Chief

Financial Officers, deputy head of Geology Division of China Association of Chief Financial Officers, deputy head of

building materials sub-committee of the Accounting Society of China and deputy head of geology sub-committee of the

Accounting Society of China. Ms. Xu graduated from Liaoning Finance and Economics Institute (遼寧財經學院) in July

1983, majoring in finance. She is also a senior accountant.



ZHANG Renjie, aged 49, is a Supervisor of the Company. Mr. Zhang has been serving as the chief financial officer of

Taian State-owned Assets Management Co., Ltd. since August 2005. Mr. Zhang previously served as a deputy director of

the finance division of Taian Fruit Company (泰安市果品公司) from August 1984 to March 1991. He served as the deputy

director of finance division and audit division of Taian Machinery and Electronics Administrative Bureau from March 1991

to January 2000. Mr. Zhang served as the manager of the finance and audit department and an assistant to the general

manager of Taian State-owned Assets from January 2000 to August 2005. Mr. Zhang graduated in 1997 from Shandong

Executive Leadership Academy (山東幹部大學) with a bachelor’s degree in accounting. He is also a senior auditor.

WANG Jianguo, aged 57, is a Supervisor of the Company. Mr. Wang is currently a vice chairman of the board of BBMG.

Prior to that, he served as the deputy head of Beijing Ceramics Factory (北京市陶瓷廠) from March 1992 to September

1995. Mr. Wang also worked in Beijing Building Material Group Corporation as an operational manager and the vice

chairman of the labour union from September 1995 to August 2000, and later became the chairman of the labor union of

BBMG since August 2000. Mr. Wang served as a director and chairman of the labour union of BBMG since March 2006,

and a director and standing deputy general manager from November 2009 to July 2012, then as the vice chairman of the

board of BBMG since July 2012. Mr. Wang graduated from Capital University of Economics and Business (首都經貿大學)

in July 1987 and majored in economics. Mr. Wang is currently an economist and senior political engineer.

Wang Yingcai, aged 42, has been a supervisor of the Company since July 2013. Mr. Wang has served as the director

of the audit department of the Company since August 2007 and as the current supervisor of several subsidiaries of

the Company. Mr. Wang worked at the finance division of the China Construction Materials and Geological Prospecting

Center (中國建築材料工業地質勘查中心) from July 1994 to April 1997, worked at the finance department of the Parent

from April 1997 to April 2004, and served as the finance manager and vice chief accountant of Sinoma Jinjing Fiber Glass

Co., Ltd. (中材金晶玻纖有限公司) from April 2004 to August 2007. Mr. Wang has served as the chief auditor of the Parent

since December 2010 and as the director of the audit department of the Parent since May 2011. Mr. Wang has served

as the supervisor of two A share-listed companies, namely of Qilianshan Co. since October 2011 and of Ningxia Building

Materials since December 2011, and served as the chairman of the supervisory committee of Sinoma Finance since April

2013. In July 2007, Mr. Wang graduated from the Research Institute of the Ministry of Finance with a master’s degree

majoring in accounting. Mr. Wang is a senior accountant and a registered tax agent.

QU Xiaoli, aged 43, is an employee representative Supervisor of the Company. Mr. Qu has been serving as the director

of the finance department of the Company since August 2007 and he is also currently supervisor of several subsidiaries

of the Company. Mr. Qu served in the audit department of China Construction Materials and Geological Prospecting

Center (中國建材地質勘查中心) from July 1995 to November 1999. He also served as the chief accountant of Xiamen ISO

Standard Sand Co., Ltd. (廈門艾思歐標準砂有限公司) from November 1999 to August 2006. Mr. Qu served as a supervisor

of Sinoma International, Qilianshan Co., Tianshan Cement and Ningxia Building Materials respectively since July 2011,

October 2011, December 2011 and December 2011 respectively, and has been a supervisor of Sinoma Finance since

April 2013. Mr. Qu graduated from Hebei College of Geology (河北地質學院) in July 1995 and majored in accounting. He

is also a senior accountant.



SENIOR MANAGEMENT

LI Xinhua, is the president of the Company, whose details are set out in the section headed “Executive Directors”.

YU Mingqing, aged 50, is the vice president of the Company. Mr. Yu worked in Wuhan Building Materials Industry

Design and Research Institute (武漢建築材料設計研究院), currently a subsidiary of the Parent, from June 1988 to June

1989. Mr. Yu worked at Shandong Industrial Ceramics Research and Design Institute (山東工業陶瓷研究設計院) from

July 1989 to April 2001, where he served various key positions such as vice head and head of the institute. Mr. Yu also

served as the head of Sinoma Synthetic Crystals Research Institute (中材人工晶體研究院), currently a subsidiary of the

Parent, from May 2001 to November 2005. Mr. Yu served as the chairman of the board of Sinoma Advanced Materials

from June 2004 to February 2009, and he had been the deputy general manager of China National Non-Metallic Materials

Corporation, our predecessor, since October 2004. Mr. Yu has worked for over 25 years in the non-metallic materials

industry and has accumulated extensive knowledge of the industry. He is entitled to a special government allowance

provided by the State Council and is a Provincial Young and Middle Aged Expert with Important Contribution (省部級有重要貢獻的中青年專家) and an Outstanding Entrepreneur in the National Building Materials Industry (全國建材行業優秀企業家). Mr. Yu also serves as the member of China Building Materials Federation, member of the State Construction

Material Industry Technology Education Committee, and standing director of Chinese Ceramic Society. Mr. Yu graduated

from Wuhan University of Technology (武漢理工大學) in January 2003, majoring in materials and holds a doctorate degree

in engineering. Mr. Yu is currently a professorate senior engineer.

GU Chao, aged 53, is the vice president of the Company, and was appointed as the secretary to the Board of the

Company in July 2010. Mr. Gu joined China Building Materials Industry Construction Corporation (中國建築材料工業建設總公司), our predecessor, in 1989, where he served various senior managerial positions in production, business

development and overseas engineering departments. Mr. Gu served as a deputy general manager of our predecessor

China National Non-Metallic Materials Corporation since September 2000. Mr. Gu has over 25 years of work experience

in the non-metallic materials industry and has profound understanding of this industry in China. Mr. Gu graduated from

Xi’an University of Architecture and Technology (西安冶金建築學院) in July 1982, majoring in constructions. Mr. Gu is

currently a professorate senior engineer.

SU Kui, aged 51, is the vice president of the Company. Mr. Su has extensive experience in corporate investment,

operation and management, and has more than 25 years of experience in the non-metallic materials industry. Mr. Su

joined the Parent in 1987 and held various positions such as manager of the general planning department, manager of

finance department, manager of planning and technical department and assistant to the general manager of the Parent.

Mr. Su had been serving as the deputy general manager of our predecessor, China National Non-Metallic Materials

Corporation, since March 2002 and was the secretary of the Board of the Company from July 2007 to July 2010. Mr.

Su is also a member of the State Construction Material Industry Technology Education Committee (國家建築材料工業科技教育委員會), director of Special Committee on Non-metallic Minerals (非金屬礦專委會), standing director of Chinese

Ceramic Society (中國硅酸鹽學會) and director-general of Non-metallic Minerals Branch (非金屬礦分會). Mr. Su graduated

from Wuhan University of Technology (武漢理工大學) in July 1984, majoring in non-metals mining. He is currently a

professorate senior engineer.



JIN Leyong, aged 59, is the vice president of the Company. Mr. Jin has over 30 years of experience in the building materials industry. Mr. Jin served various positions such as assistant engineer, engineer, department head and assistant to the president of Tianjin Cement Institute from January 1982 to June 1992. Mr. Jin then joined China Nongfang North Corporation (中國農房華北公司) and served as the deputy general manager and general manager from June 1992 to October 1999. Mr. Jin was subsequently appointed as the deputy chief of the State Building Materials Bureau Retirement Department (國家建材局離退休幹部局) for a term commencing from October 1999 and ending in October 2001. Mr. Jin first joined the Parent in October 2001 and served senior managerial positions in various subsidiaries of the Parent. Mr. Jin had served as the deputy general manager of our predecessor, China National Non-Metallic Materials Corporation, since December 2005. Mr. Jin graduated from Wuhan University of Technology (武漢理工大學) in January 1982 with a bachelor’s degree in constructions. He is currently a professorate senior engineer. In December 2012, he was qualified as CERMIC (高級風險管理與內控職業經理) by China Enterprise Confederation (中國企業聯合會) and China Enterprise Directors Association (中國企業家協會).

SUI Yumin, aged 49, is the vice president of the Company and has been serving as the chairman of the board of Sinoma Cement since April 2010. Mr. Sui has over 25 years of extensive work experience in the cement industry. He held various positions in Lunan Cement Factory (魯南水泥廠) such as deputy chief engineer and executive deputy general manager from August 1986 to August 2003. Mr. Sui worked as the deputy general manager of Sinoma Cement and the chairman of the board and general manager of Sinoma Hanjiang from August 2003 to September 2004. Subsequently, Mr. Sui served as the deputy general manager and executive deputy general manager of Tianshan Cement until July 2007. Mr. Sui served as a director of Tianshan Cement from October 2005 to December 2013, and has been serving as a director of Ningxia Building Materials since December 2008. Mr. Sui enjoys special government allowances from the state Council, and is currently the vice president of China Cement Association (中國水泥協會). Mr. Sui graduated from Shandong Institute of Building Materials (山東建材學院) in July 1986, majoring in cement engineering, and obtained his executive master’s degree in business administration from Cheung Kong Graduate School of Business (長江商學院) in September 2010. Mr. Sui is currently a professorate senior engineer.

WANG Baoguo, aged 58, is the vice president of the Company. Mr. Wang worked for the Shandong Economic Planning Commission (山東省計委) from 1981 to 1992. Mr. Wang also served as deputy mayor of Dongying City, Shandong Province (山東省東營市副市長) from December 1992 to October 2003. Mr. Wang served as the deputy general manager of our predecessor, China National Non-Metallic Materials Corporation, from October 2003 to July 2007, and a Supervisor of the Company from July 2007 to October 2009, and he has been serving as the vice president of the Company since October 2009 and as the chairman of Yangzhou Zhongke Semiconductor Lighting Co., Ltd. (currently a subsidiary of the Parent) since February 2011. Mr. Wang also served as the general manager of Sinoma Jinjing from February 2004 to June 2011, and the chairman from February 2004 to January 2013. Mr. Wang graduated from the Party School of the Central Committee of the Communist Party of China (CPC) (中共中央黨校), majoring in economics and management. Mr. Wang is currently a senior economist.

WANG Guanglin, aged 55, is the vice president of the Company. Mr. Wang has over 25 years of experience in cement industry. He held various positions such as an assistant to the head and the deputy head of Ningxia Cement Factory (寧夏水泥廠) from November 1984 to March 1997, and successively served as head, deputy general manager, chairman of the board and general manager in Qingtongxia Cement Factory, Ningxia Hui Autonomous Region Building Materials Industrial Corporation, Qingtongxia Cement Corporation and Ningxia Building Materials Group from March 1997 to November 2005, respectively. He served as the chairman of the board of Sinoma Cement from September 2007 to April 2010, and served as the chairman of the board of Ningxia Building Materials from November 2005 to November 2013. Mr. Wang has also been serving as a director of two A share-listed companies, namely Ningxia Building Materials and Tianshan Cement, since October 2013 and January 2014, respectively. Mr. Wang graduated from Chinese University of Hong Kong in December 2008 with a master’s degree in business administration. Mr. Wang is currently a professorate senior engineer.



WANG Wei, aged 57, is the vice president of the Company. Mr. Wang served as a director and the president of Sinoma

International from December 2001 to December 2009 and has been serving as the chairman of the board of Sinoma

International since December 2009. Mr. Wang served as the supervisor of the Company from July 2007 to March 2010

and was appointed as the vice president of the Company in March 2010. Mr. Wang joined the Parent in 1984 and held

various positions, such as deputy head of Nanjing Cement Industry Design and Research Institute. Mr. Wang served

as the deputy general manager and general manager of China National Non-Metallic Materials Corporation from June

2001 to March 2002. As a nationwide outstanding entrepreneur in the building materials industry entitled to a special

government allowance provided by the State Council, Mr. Wang has extensive knowledge of the industry. He also serves

as the vice chairman of China Chamber of Commerce for Import and Export of Machinery and Electronic Products (中國機電產品進出口商會), an executive member of the Mergers and Acquisitions Financing Committee of the China Association

for Public Companies (中國上市公司協會併購融資委員會), the vice president of China Building Materials Federation (中國建築材料聯合會) and the vice president of China Cement Association (中國水泥協會). Mr. Wang graduated from Nanjing

University of Technology (南京工業大學) in January 1982, majoring in cement engineering. He is currently a professorate

senior engineer.

LIU Yan, aged 48, is the vice president of the Company. Mr. Liu has also been serving as the chairman of the board of

Sinoma Advanced Materials since January 2010. Mr. Liu joined the Parent in 1985 and held various positions such as

assistant to the head and deputy head of Nanjing Fiberglass R&D Institute (南京玻璃纖維研究設計院). Mr. Liu was the

vice president of Sinoma Science & Technology from December 2001 to May 2003 and was the president of Sinoma

Science & Technology from May 2003 to October 2009. Mr. Liu graduated from Nanjing University of Technology (南京工業大學) in July 1985, majoring in silicate engineering. Mr. Liu is currently a senior engineer.

SUN Tieshi, aged 49, is the vice president of the Company. Mr. Sun worked for the State Bureau of Building Materials

Industry from July 1987 to February 2001 and served in China Building Materials Federation as the director of the office

and the secretary-general from February 2001 to March 2009 and as the vice chairman of China Building Materials

Federation from March 2009 to November 2013. Mr. Sun also serves as the president of China Building Materials Market

Association (中國建材市場協會). Mr. Sun graduated from Wuhan University of Technology (武漢工業大學) with a master’s

degree in engineering management in December 1995. Mr. Sun is currently a senior engineer.

YU Kaijun, aged 50, is the Chief Financial Officer of the Company. Mr. Yu worked at the Finance Bureau of Pingliang

District of Gansu Province from July 1982 to November 1990. Mr. Yu served as the chief financial officer and deputy

general manager of Shenzhen Languang Science & Technology Co., Ltd. (深圳蘭光科技股份有限公司) (and its predecessor,

Shenzhen Languang Electronic Industrial Corporation (深圳蘭光電子工業總公司)) from November 1990 to October 2001.

Mr. Yu served as the chief financial officer of Sinoma International from December 2001 to January 2011. Mr. Yu has

been a supervisor of Ningxia Building Materials and Tianshan Cement since December 2011. Mr. Yu graduated from

the Hong Kong Polytechnic University in December 2006, majoring in accounting and obtained a master’s degree in

accounting. He is currently a senior accountant.

Directors, Supervisors and senior management have no other relationships with other Directors, Supervisors and senior

management apart from working relationships.


DIRECTORS’ REPORT

The Board is pleased to present the annual report for the year ended 31 December 2013, together with the audited

financial statements of the Group for the year ended 31 December 2013.

PRINCIPAL BUSINESS

The Group is principally engaged in the cement equipment and engineering services, cement and high-tech materials

businesses. Details of the businesses of the Company’s principal subsidiaries are set out in note 56(a) to the

consolidated financial statements.

RESULTS

The results of the Group for the year ended 31 December 2013 and the financial information of the Group as at 31

December 2013 are set out in the audited consolidated financial statements of this report.

SHARE CAPITAL

The share capital structure of the Company as at 31 December 2013 is set out as follows:

Class of Shares Number of Shares

Approximate

Percentage to

the Total Issued

Share Capital

Domestic shares 2,276,522,667 63.74%

Foreign shares

Unlisted foreign shares 130,793,218 3.66%

H Shares 1,164,148,115 32.60%

Total 3,571,464,000 100%

DIVIDEND

The Board recommends the distribution of final dividend of RMB0.02 per share (tax inclusive) in an aggregate amount of

RMB71.43 million for the year ended 31 December 2013.

PUBLIC FLOAT

As at the date of this report, based on the public information available to the Company and as far as the Directors are

aware, the Company fulfilled the public float requirement under Rule 8.08 of the Listing Rules.


DIRECTORS’ REPORT

DIRECTORS AND SUPERVISORS

Certain information concerning the Directors and the Supervisors as at 31 December 2013 is set out below:

Name Position Gender Age Term

LIU Zhijiang Chairman of the Board and Executive Director Male 56 30 July 2013 – 29 July 2016

LI Xinhua Vice-chairman of the Board and Executive Director Male 49 30 July 2013 – 29 July 2016

President

YU Shiliang Non-executive Director Male 59 30 July 2013 – 29 July 2016

ZHANG Hai Non-executive Director Male 55 30 July 2013 – 29 July 2016

LI Jianlun Non-executive Director Male 56 30 July 2013 – 29 July 2016

YU Guobo Non-executive Director Male 57 30 July 2013 – 29 July 2016

TANG Baoqi Non-executive Director Male 54 30 July 2013 – 29 July 2016

LEUNG Chong Shun Independent non-executive Director Male 48 30 July 2013 – 29 July 2016

LU Zhengfei Independent non-executive Director Male 50 30 July 2013 – 29 July 2016

WANG Shimin Independent non-executive Director Male 65 30 July 2013 – 29 July 2016

ZHOU Zude Independent non-executive Director Male 68 30 July 2013 – 29 July 2016

XU Weibing Chairman of the Supervisory Committee Female 54 30 July 2013 – 29 July 2016

ZHANG Renjie Supervisor Male 49 30 July 2013 – 29 July 2016

WANG Jianguo Supervisor Male 57 30 July 2013 – 29 July 2016

WANG Yingcai Supervisor Male 42 30 July 2013 – 29 July 2016

QU Xiaoli Supervisor Male 43 30 July 2013 – 29 July 2016


DIRECTORS’ REPORT

The term of office of all Directors is not more than 3 years.

The biography details of the Directors and the Supervisors are set out in the section of “Biography of Directors,

Supervisors and Senior Management”.

DISCLOSURE OF INTERESTS

Directors’, Supervisors’ and Chief Executive’s Interests and Short Positions in the Company’s Shares, Underlying Shares and Debentures

As at 31 December 2013, Mr. ZHANG Hai, a non-executive Director of the Company, was interested in 42,000 shares of

the Company.

Save as disclosed above, no other Director, Supervisor or chief executive of the Company has any interest or short

position in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the

meaning of Part XV of the SFO), which were required to be notified to the Company and the Hong Kong Stock Exchange

pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or

deemed to have under such provisions of the SFO) or which were required, pursuant to Section 352 of the SFO, to

be recorded in the register referred to therein or which were required, pursuant to the Model Code for Securities

Transactions by Directors of Listed Companies, to be notified to the Company and the Hong Kong Stock Exchange.

Directors’, Supervisors’ and Chief Executive’s Rights in the Subscription of Shares and Debentures

During the reporting period, no Director, Supervisor or chief executive of the Company or their respective spouses or

children under the age of 18, had been granted any right by the Company to subscribe for shares or debentures of the

Company or any of its associated corporations, or had exercised any such right to subscribe for shares or debentures

above.


DIRECTORS’ REPORT

Substantial Shareholders’ and Other Persons’ Interests and Short Positions in Shares and Underlying Shares

As at 31 December 2013, so far as the Directors, Supervisors and the chief executive of the Company are aware,

the persons listed in the following table had interests and/or short positions in the shares or underlying shares of the

Company as recorded in the register required to be kept under Section 336 of Part XV of the SFO:

Name Type of Shares

Nature of

Interests

Number of

Shares interested

Percentage to the

respective class of

issued shares

Percentage to

the total

share capital

China National Materials Group

Corporation Ltd.

Domestic shares N/A 1,494,416,985 65.64% 41.84%

China Cinda Asset Management

Co., Ltd.

Domestic shares N/A 319,788,108 14.05% 8.96%

Taian Taishan Investment Co., Ltd. Domestic shares N/A 309,786,095 13.61% 8.67%

Well Kent International Holdings

Company Limited

Unlisted foreign shares N/A 130,793,218 100.00% 3.66%

Lazard Asset Management LLC H Shares Long position 118,136,964 10.15% 3.31%

National Council for Social Security Fund H Shares Long position 94,253,115 8.10% 2.64%

Note: The above information is based on the data provided on the website of the Hong Kong Stock Exchange (www.hkex.com.hk).

Save as disclosed above, so far as the Directors, Supervisors and chief executive of the Company are aware, as at 31

December 2013, there was no other person having interests and/or short positions in the shares and underlying shares

of the Company which were required, pursuant to Section 336 of Part XV of the SFO, to be recorded in the register

referred to therein.

MAJOR CUSTOMERS AND SUPPLIERS

The consolidated turnover from the five largest customers of the Group accounted for less than 30% of the Group’s total

turnover in 2013.

The consolidated total purchases made by the Group from its five largest suppliers accounted for less than 30% of the

Group’s total purchases in 2013.

None of the Directors, their associates or any shareholder (which to the knowledge of the Directors owns more than 5%

of the share capital of the Company) have beneficial interests in the five largest customers or in the five largest suppliers

of the Group.


DIRECTORS’ REPORT

PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES

For the year ended 31 December 2013, neither the Company nor any of its subsidiaries purchased, sold or redeemed any

listed securities of the Company or any of its subsidiaries.

PROPERTY, PLANT AND EQUIPMENT

For the year ended 31 December 2013, the addition of property, plant and equipment of the Group was approximately

RMB7,417.45 million. Details of the movements are set out in note 21 to the consolidated financial statements.

RESERVES

Details of the movement of the Group’s reserves during the year 2013 are set out in the “Consolidated Statement of

Changes in Equity” of this report.

EMPLOYEES

As at 31 December 2013, the Group had 57,935 employees. Details of employee benefits for the year are set out in note

17 to the consolidated financial statements.

REMUNERATION POLICY

The Company has set up the Remuneration Committee under the Board, which is responsible for formulating the

remuneration policy and remuneration proposal for the executive Directors and senior management of the Company

in accordance with its terms of reference. The remuneration of the executive Directors is determined and realized

according to the service contracts of the Directors as approved at the general meeting and the operating performance

of the Company. The remuneration of the non-executive Directors, the independent non-executive Directors and the

Supervisors is determined and realized according to the service contracts of the non-executive Directors, the independent

non-executive Directors and the Supervisors as approved at the general meeting.

The Company adopts position-based remuneration system for general management staff, and their remuneration is

determined according to the relative importance of the positions, the duties assumed in the positions and other factors.

Various salary models such as piece rate and skill-based wage model were adopted for other employees based on the

distinctive employee category and their job nature.

The Company stringently controlled the management of the total amount of salaries of its subsidiaries in accordance with

the applicable policy of the Chinese government. It sought to maintain an appropriate balance between salary increase

and the growth in economic benefits, in order to achieve a win-win situation among shareholders, management and

employees and facilitate the harmonious development of the enterprise.

As required by the relevant state and local labour and social welfare laws and regulations, the Company contributes to

certain housing fund and social insurance premiums for its employees on a monthly basis. Insurance premiums are paid

for retirement insurance, medical insurance, unemployment insurance, maternity insurance and work injury insurance. In

Beijing, as required by the prevailing and applicable local laws and regulations, the Company’s contributions to retirement

insurance, medical insurance, unemployment insurance, work injury insurance, maternity insurance and housing fund

shall account for 20%, 10%, 1%, 0.3%, 0.8% and 12% of the total basic monthly salary of an employee.


DIRECTORS’ REPORT

RETIREMENT PLAN OF EMPLOYEES

Details are set out in note 39 to the consolidated financial statements.

SHARE APPRECIATION RIGHTS SCHEME

To motivate and award the senior management team and other key members of the Company, the Company formulated

the share appreciation rights scheme. Such scheme was considered and approved by the relevant administrative

department of the Chinese government on 15 July 2010 and was approved at the second extraordinary general meeting

of the Company held on 22 October 2010. A total of 4.13 million share appreciation rights were granted to 16 Directors

and senior management members. On 22 December 2010, Mr. Zhou Yuxian, an executive Director, resigned and his

300,000 share appreciation rights granted under the share appreciation rights scheme were lapsed. On 2 September

2012, Mr. Tan Zhongming, the chairman of the Board, passed away and his 350,000 share appreciation rights granted

under the share appreciation rights scheme were lapsed.

The lock-up period of the share appreciation rights expired on 22 October 2012. Pursuant to the share appreciation rights

scheme, the 3,480,000 share appreciation rights granted to the remaining 14 Directors and senior management members

will be vested to the incentive recipients in even proportion for each of the three years (2012-2014) subject to the results

conditions upon the expiry of the lock-up period of the share appreciation rights. As the results of the Company in 2012

and 2013 did not fulfill the vesting conditions as required under the share appreciation rights scheme, 2,320,000 share

appreciation rights would not be vested to the remaining 14 Directors and senior management members and became

lapsed. The vesting of the remaining 1,160,000 share appreciation rights to the remaining 14 Directors and senior

management members is subject to the results of the Company.

DIRECTORS’, SUPERVISORS’ AND SENIOR MANAGEMENT’S REMUNERATIONS

Details of the remunerations of the Directors, Supervisors and chief executive of the Company are set out in note 18

to the consolidated financial statements, the remunerations of other senior management of the Company fell within the

following bands:

2013

(person)

0 to RMB500,000 10

RMB500,001 to RMB1,000,000 2

12

SERVICE CONTRACTS WITH DIRECTORS AND SUPERVISORS

The Company has entered into service contracts with all the Directors and the Supervisors with a term of up to 3 years.

No Director or Supervisor has entered into or intends to enter into a service contract with the members of the Group

which cannot be terminated by the Group within one year without payment of compensation, other than statutory

compensation.


DIRECTORS’ REPORT

DIRECTORS’ AND SUPERVISORS’ INTERESTS IN CONTRACT

No Director or Supervisor of the Company had a material interest, either directly or indirectly, in any material contract relating to the business of the Group, to which the Company or any of its subsidiaries was a party, and which was subsisting at the end of the year 2013 or at any time during the year 2013.

MANAGEMENT CONTRACT

During the reporting period, the Company has not signed or held any contract concerning the management of the general business or any major business segment of the Company.

CONNECTED TRANSACTIONS

1. Exempted Connected Transactions

1.1 Non-competition Agreement

The Company entered into a non-competition agreement with the Parent on 23 November 2007, pursuant to which the Parent agreed not to, and to procure its subsidiaries (other than the Group) not to, compete with the core businesses of the Group and granted the Group options and pre-emptive rights to acquire the retained business and certain future business from the Parent.

For the year ended 31 December 2013, save as disclosed in the prospectus of the Company, no Director of the Company (including independent non-executive Directors) has made any decision to exercise the options.

For the year ended 31 December 2013, the Parent confirmed its compliance with the commitments stated in the non-competition agreement, and provided the independent non-executive Directors with all information required for the annual review and the execution of the non-competition agreement.

2. Non-exempted Connected TransactionsMajor connected transactions of the Group during 2013 are as follows:

2.1. Acquisition of 100% equity interest held by the Parent in SDRI by Suzhou Company

On 8 January 2013, Suzhou Company, a non-wholly owned subsidiary of the Company, entered into the SDRI Equity Transfer Agreement with the Parent, pursuant to which Suzhou Company agreed to acquire a 100% equity interest in SDRI held by the Parent for a cash consideration of RMB60,541,200. The acquisition was completed on 19 March 2013, and SDRI has therefore become a wholly-owned subsidiary of Suzhou Company and an indirect subsidiary of the Company.

Details of the transaction are set out in the announcement of the Company dated 8 January 2013 on the websites of the Hong Kong Stock Exchange and the Company.

The Parent is a controlling shareholder of the Company, and is therefore a connected person of the Company under the Listing Rules.

The Company is of the view that the acquisition will (i) integrate the assets of the Group and further enhance the operating business of the Group; (ii) reduce connected transactions and optimize the corporate governance structure; and (iii) generate higher return for the Group in future by way of acquisition of the relevant land use rights and property owned by SDRI.


DIRECTORS’ REPORT

2.2. Acquisition of 100% equity interest held by the Parent in NRDI by Sinoma Science &

Technology

On 19 August 2013, Sinoma Science & Technology, a non-wholly owned subsidiary of the Company,

entered into the NRDI Equity Transfer Agreement with the Parent, pursuant to which Sinoma Science &

Technology agreed to acquire a 100% equity interest in NRDI held by the Parent for a cash consideration

of RMB186,107,000. The acquisition was completed on 5 December 2013, and NRDI has therefore

become a wholly-owned subsidiary of Sinoma Science & Technology and an indirect subsidiary of the

Company.

Details of the transaction are set out in the announcement of the Company dated 19 August 2013 on the

websites of the Hong Kong Stock Exchange and the Company.

The Parent is a controlling shareholder of the Company, and is therefore a connected person of the

Company under the Listing Rules.

The Company is of the view that the acquisition will (i) further integrate the assets of the Group; (ii) reduce

connected transactions and further optimize the corporate governance structure; and (iii) generate higher

return for the Group in future by way of efficient management on the undeveloped land and properties

owned by NRDI after the acquisition.

3. Non-exempted Continuing Connected Transactions

The Group entered into certain non-exempted continuing connected transactions in 2013. The table below sets

out the annual caps and the actual transaction amounts of such transactions:

Expenditure Revenue

Connected Transactions

Actual

amount Cap

Actual

amount Cap

RMB RMB RMB RMB

Property Lease Framework Agreement (1) 12,313,040 40,000,000 – –

Mutual Supply of Services

Framework Agreement (2) 451,667,800 1,400,000,000 11,832,852 20,000,000

Mutual Supply of Products

Framework Agreement (3) 195,174,099 750,000,000 127,991,797 130,000,000

Deposit Services

(Maximum daily balance

(including accrued interests))

Other Financial Services

(Services fee payable to

Sinoma Finance)

Actual

amount Cap

Actual

amount Cap

RMB RMB RMB RMB

Financial Services Framework Agreement (4) 758,615,470 3,100,000,000 60,000 100,000,000


DIRECTORS’ REPORT

3.1 Property Lease Framework Agreement

In order to regulate the property lease arrangements between the Parent Group (other than the Group) and

the Group, a property lease framework agreement was renewed between the Parent and the Company on

12 October 2012.

Pursuant to the property lease framework agreement, the Group agreed, in accordance with the

agreements between both parties from time to time, to lease from the Parent Group (other than

the Group) certain lands and buildings (including but not limited to production lines, office buildings,

warehouses and employees’ dormitories) in the PRC, for the purpose of the operation of the Group.

Under the property lease framework agreement, the rentals shall be determined in accordance with the

following pricing principles: 1) the state-prescribed price; 2) where there is no state-prescribed price, then

the relevant state-recommended price; 3) where there is no state-prescribed price or state-recommended

price, then the relevant market price; 4) where there is no such price or such price is not applicable, then

the contracted price, which shall be determined on the basis of reasonable cost plus reasonable profit

margin and by reference to the historical rentals.

The property lease framework agreement was for a term of three years commencing from 1 January

2013 and ending on 31 December 2015. Upon expiry, the property lease framework agreement shall be

renewed for a further term of three years, subject to the relevant requirements under the Listing Rules

and mutual agreement of both parties. Details of the transaction are set out in the announcement of the

Company dated 12 October 2012 on the websites of the Hong Kong Stock Exchange and the Company.



During the reporting period, the annual cap on the aggregate rentals payable by the Group to the Parent

Group for 2013 under the above property lease framework agreement was RMB40,000,000 and the actual

total rental incurred was approximately RMB12,313,040.

3.2 Mutual Supply of Services Framework Agreement

On 12 October 2012, the Company entered into the Mutual Supply of Services Framework Agreement with

the Parent, pursuant to which, the Company agreed that the Group supplied to the Parent Group certain

services (including but not limited to supply of electricity, water and heating, design services and resources

for power); whereas the Parent agreed that the Parent Group supplied to the Group certain services (including

but not limited to the Engineering, Procurement and Construction (EPC) of surplus energy electricity

generation, project construction, exploration, equipment repair and installation, and logistics services).

Under the mutual supply of services framework agreement, the price shall be determined in accordance

with the following pricing principles: 1) the state-prescribed price; 2) where there is no state-prescribed

price, then the relevant state-recommended price; 3) where there is no state-recommended price, then the

relevant market price; 4) where there is no relevant market price, then the contracted price, which shall be

determined on the basis of reasonable cost plus reasonable profit margin and by reference to the historical

figures for preceding years.


DIRECTORS’ REPORT

The mutual supply of services framework agreement was for a term of three years commencing from 1

January 2013 and ending on 31 December 2015. Upon expiry, the mutual supply of services framework

agreement shall be renewed for a further term of three years, subject to the relevant requirements under

the Listing Rules and mutual agreement of both parties. Details of the transaction are set out in the

announcement of the Company dated 12 October 2012 on the websites of the Hong Kong Stock Exchange

and the Company.



During the reporting period, a) the annual cap on revenue from the provision of certain services to

the Parent Group by the Group for 2013 was RMB20,000,000 and the actual revenue incurred was

approximately RMB11,832,852; b) the annual cap on expenditure from the provision of certain services to

the Group by the Parent Group for 2013 was RMB1,400,000,000 and the actual expenditure incurred was

approximately RMB451,667,800.

3.3 Mutual Supply of Products Framework Agreement

On 12 October 2012, the Company entered into the Mutual Supply of Products Framework Agreement

with the Parent, pursuant to which, the Company agreed that the Group purchased for self-use and the

Parent agreed that the Parent Group sold certain products (including but not limited to equipment and

parts, raw materials, fuel oil and precious metals); whereas the Parent agreed that the Parent Group

purchased for self-use or for export to the third parties independent from the Group as the Group was lack

of the relevant export license and the Company agreed that the Group sold certain products (including but

not limited to cement, commercial concrete, equipment, ceramic knife and Alumina).

Under the mutual supply of products framework agreement, the price shall be determined in accordance

with the following pricing principles: 1) the state-prescribed price; 2) where there is no state-prescribed

price, then the relevant state-recommended price; 3) where there is no state-recommended price, then the

relevant market price; 4) where there is no relevant market price, then the contracted price, which shall be

determined on the basis of reasonable cost plus reasonable profit margin and by reference to the historical

figures for preceding years.

The mutual supply of products framework agreement was for a term of three years commencing from 1

January 2013 and ending on 31 December 2015. Upon expiry, the mutual supply of products framework

agreement shall be renewed for a further term of three years, subject to the relevant requirements under

the Listing Rules and mutual agreement of both parties. Details of the transaction are set out in the

announcement of the Company dated 12 October 2012 on the websites of the Hong Kong Stock Exchange

and the Company.



During the reporting period, a) the annual cap on revenue from the sale of certain products to the Parent

Group by the Group for 2013 was RMB130,000,000 and the actual revenue incurred was approximately

RMB127,991,797; b) the annual cap on expenditure from the sale of certain products to the Group by

the Parent Group for 2013 was RMB750,000,000 and the actual expenditure incurred was approximately

RMB195,174,099.


DIRECTORS’ REPORT

3.4 Financial Services Framework Agreement

On 24 May 2013, the Company and Sinoma Finance entered into the Financial Services Framework

Agreement, pursuant to which Sinoma Finance agreed to provide the deposit services, loan services and

other financial services to the Group1.

The pricing principles of the financial services to be provided by the Sinoma Finance to the Group under

the Financial Services Framework Agreement are as follows:

1) In respect of deposit services, the interest rates for deposits provided to the Group by the Sinoma

Finance shall not be lower than the lowest rate allowed by the PBOC for similar types of deposits.

Subject to the above, the interest rates for deposits shall be the higher of (a) the same as or higher

than the interest rates for similar types of deposits payable by Sinoma Finance to other members

of the Parent Group under the same conditions or (b) the same as or higher than the interest rates

for similar types of deposits provided by normal commercial banks in the PRC under the same

conditions.

2) In respect of loan services2, the interest rates for loans provided to the Group by Sinoma Finance

shall not be higher than the upper limit allowed by the PBOC for the similar types of loans. Subject

to the above, the interest rates for the loans shall be the lower of (a) the same as or lower than

the interest rates charged by Sinoma Finance to other members of the Parent Group for the similar

loans under the same conditions or (b) the same as or lower than the interest rates for the similar

loans charged by normal commercial banks in the PRC under the same conditions.

3) In respect of other financial services, the fees for other financial services charged by the Sinoma

Finance shall not be higher than the upper limit (if applicable) of the fees stipulated by the PBOC.

Subject to the above, the fees shall be the lower of (a) the same as or lower than the fees for

similar types of financial services charged by Sinoma Finance to other members of the Parent

Group under the same conditions and (b) the same as or lower than the fees for similar types of

financial services charged by normal commercial banks in the PRC under the same conditions.

1 Other financial services under the Financial Services Framework Agreement, including but not limited to bills

acceptance and discounting services, assistance in achieving the collection and payment of the transactions

proceeds, clearing and settlement services, financial leasing, financial advising, credit verification and related

consulting, agency services and other business approved by CBRC.

2 In respect of the loan services provided by Sinoma Finance to the Group, as the Group did not pledge any asset

of the Group as security for the loans, and the loan services was on the common commercial terms, therefore,

the loan services under the Financial Services Agreement were exempted from the reporting, announcement and

independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

The term of the financial services framework agreement commenced from 30 July 2013 and ending on

31 December 2015. Details of the transaction are set out in the announcements of the Company dated

24 May 2013 and 30 July 2013, respectively, on the websites of the Hong Kong Stock Exchange and the

Company.

Sinoma Finance is a subsidiary of the Parent, the controlling Shareholder of the Company, and therefore

Sinoma Finance is a connected person of the Company under the Listing Rules.


DIRECTORS’ REPORT

During the reporting period, a) in respect of deposit services, the annual cap on maximum daily balance

of deposits placed by members of the Group with Sinoma Finance (including accrued interests) for 2013

was RMB3,100,000,000, and the actual maximum daily balance (including accrued interests) amounted

to approximately RMB758,615,470; b) in respect of other financial services, the annual cap on service

fees payable to Sinoma Finance by members of the Group for 2013 was RMB100,000,000, and the actual

service fees paid amounted to approximately RMB60,000.

The Directors (including the Independent non-executive Directors) confirmed with the Board that they have

reviewed the non-exempted continuing connected transactions under paragraphs 3.1 to 3.4 above and

confirmed that such transactions have been entered into: (a) in the ordinary and usual course of business

of the Group; (b) on normal commercial terms, or if there are not sufficient comparable transactions to

judge whether they are on normal commercial terms, on terms no less favourable to the Group than

those available to or from independent third parties; and (c) in accordance with the relevant agreements

governing them and on terms that are fair and reasonable and in the interest of the shareholders of the

Company as a whole.

The auditor of the Company has performed certain agreed-upon procedures on the above continuing

connected transactions and has provided a letter to the Board to report the factual findings as follows:

– The above continuing connected transactions have obtained the approval of the Board;

– The pricing of the continuing connected transactions involving provisions of goods and services by

the Group, in all material respects, are in accordance with the pricing policies of the Company as

disclosed in note 54 to the financial statements;

– The above continuing connected transactions, in all material respects, have been executed in

accordance with the terms of the agreements governing such transactions; and

– The continuing connected transactions as disclosed in paragraphs 3.1 to 3.4 above did not exceed

the relevant annual caps as disclosed in the respective announcements of the Company.

Save as disclosed above, there is no related party transaction or continuing related party transaction set

out in note 54 to the financial statements fall into the category of discloseable connected transactions or

continuing connected transactions under the Listing Rules. The Company has complied with the disclosure

requirements under Chapter 14A of the Listing Rules with respect to the connected transactions and

continuing connected transactions.

PRE-EMPTIVE RIGHT

There is no pre-emptive right provision under the Articles of Association and the PRC laws which would oblige the

Company to offer new shares to its existing shareholders on a pro-rata basis.


DIRECTORS’ REPORT

TAXATION

As stipulated by the Notice on Issues relating to Enterprise Income Tax Withholding over Dividends Distributable to their

H-share shareholders who are Overseas Non-resident Enterprises by Chinese Resident Enterprises published by the State

Administration of Taxation (Guoshuihan [2008] No.897), when Chinese resident enterprises distribute annual dividends for

the year 2008 and years thereafter to their H-share shareholders who are overseas non-resident enterprises, enterprise

income tax shall be withheld at a uniform rate of 10%. Pursuant to the Notice on the Issues on Levy of Individual Income

Tax after the Abolishment of Guoshuifa [1993] No. 045 Document issued by the State Administration of Taxation on 28

June 2011, the dividend to be distributed by the PRC non-foreign invested enterprises whose shares have been issued

in Hong Kong to the overseas resident individual shareholders is subject to individual income tax with a tax rate of 10%

in general. Shareholders may apply for tax refund in accordance with relevant provisions including taxation agreements/

arrangement after receiving the dividends. Shareholders should consult their tax advisers regarding the PRC, Hong Kong

and other tax implications of owning and disposing of the Company’s H-shares.

MATERIAL LEGAL MATTERS

Sinoma E&E, a wholly-owned subsidiary of Sinoma International (a subsidiary of the Company) involved into the following

material legal matters:

Sinoma E&E filed civil actions to the court in respect of its contract disputes with Baotou Industrial Group Co., Ltd. and

its five associate companies. The total value of the subject matter of the actions is RMB477,068,140.57. The mediation

agreements had been reached by both parties. Details of the case are set out in the announcements of the Company

dated 22 January 2013 and 14 March 2013 on the websites of the Hong Kong Stock Exchange and the Company,

respectively.

Sinoma E&E filed civil actions to the court in respect of its contract disputes with COSCO Supply Chain and Beijing

CMST respectively. The values of the subject matter of the actions are RMB215,531,771.53 and RMB20.268 million

respectively. Currently, each of COSCO Supply Chain and Beijing CMST has appealed to the court in respect of the

first instance judgment, and no judgment of second instance has been made. Details of the cases are set out in the

announcements of the Company dated 25 June 2013, 31 December 2013 and 18 January 2014 on the websites of the

Hong Kong Stock Exchange and the Company, respectively.

Sinoma E&E filed civil actions to the court in respect of its contract disputes with the defendants including Shanghai

Dingqi Trading Co,. Ltd. (上海鼎企商貿有限公司). The value of the subject matter of the actions is RMB106,553,277.02.

Currently, the court has accepted the actions, and no judgment has been made. Details of the case are set out in the

announcement of the Company dated 14 August 2013 on the websites of the Hong Kong Stock Exchange and the

Company.

Sinoma E&E filed civil actions to the court in respect of its contract disputes with the defendants including Shanghai

Fuyuan Metal Materials Co., Ltd., and filed two civil actions to the court in respect of its contract disputes with the

defendants including Shanghai Xinkuang Iron & Steel Co., Ltd.. Currently, the court has accepted the actions, and no

judgment has been made. In addition, Sinoma E&E filed a civil action to the court in respect of its contract dispute with

Hangzhou Bay Industrial Co., Ltd., which is currently at the stage of enforcement of letter of civil mediation. Details of

the cases are set out in the announcement of the Company dated 8 January 2014 on the websites of the Hong Kong



DIRECTORS’ REPORT

Sinoma E&E filed a civil action to the court in respect of its contract dispute with SinoSteel Guangdong Co., Ltd.. The

value of the subject matter of the action is RMB52,396,646.58. The action was dismissed by the court of first instance.

Currently, Sinoma E&E has appealed to the court in respect of the first instance judgment, and no judgment of second

instance has been made. Details of the case are set out in the announcements of the Company dated 25 June 2013 and

1 March 2014 on the websites of the Hong Kong Stock Exchange and the Company, respectively.

Save as disclosed above, the Company had no other material legal matters during the reporting period.

AUDITORS

SHINEWING (HK) CPA Limited and ShineWing Certified Public Accountant LLP have been appointed as the Hong Kong

auditor and PRC auditor of the Company, respectively, for the year ended 31 December 2013. SHINEWING (HK) CPA

Limited has audited the accompanying financial statements that are prepared in accordance with Hong Kong Financial

Reporting Standards. These two auditors have been appointed by the Company since 16 December 2008.


SUPERVISORY COMMITTEE’S REPORT

During the reporting period, members of the Supervisory Committee actively performed their duties in accordance with

the relevant laws and regulations and the requirements of the Articles of Association and effectively supervised the

compliance of the convening and decision-making processes of the Board meetings and the implementation procedures

with the relevant laws and regulations and the requirements of the Articles of Association, so as to protect the interests

of the shareholders and the long-term interests of the Company.

During the reporting period, the Supervisory Committee had convened six meetings. At the twelfth meeting of the

second session of the Supervisory Committee held on 25 March 2013, the Company’s 2012 annual report, the audited

financial report, the annual profit distribution proposal and the Supervisory Committee’s report were considered and

approved. At the thirteenth meeting of the second session of the Supervisory Committee held on 26 April 2013, the

2013 first quarterly financial statements of the Company were considered and approved. At the fourteenth meeting

of the second session of the Supervisory Committee held on 24 May 2013, the re-election of the members of the

Supervisory Committee were considered and approved. At the first meeting of the third session of the Supervisory

Committee held on 30 July 2013, the candidate for the chairman of the third session of the Supervisory Committee was

considered and approved. At the second meeting of the third session of the Supervisory Committee held on 26 August

2013, the 2013 interim report of the Company was considered and approved. At the third meeting of the third session

of the Supervisory Committee held on 30 October 2013, the 2013 third quarterly financial statements of the Company

were considered and approved. Mr. Zhang Renjie, a Supervisor, appointed Ms. Xu Weibing as his proxy to attend the

twelfth meeting of the second session of the Supervisory Committee and the second meeting of the third session of

the Supervisory Committee on behalf of him, and Mr. Yu Xingmin, a Supervisor, appointed Ms. Xu Weibing as his proxy

to attend the fourteenth meeting of the second session of the Supervisory Committee on behalf of him. All of the other

Supervisors attended the aforesaid meetings of the Supervisory Committee. During the reporting period, members of the

Supervisory Committee attended all the general meetings of the Company convened during the year and attended the

Board meetings in person as nonvoting participants during the year, and also reviewed the proposals which have been

submitted to the Board for consideration. The Supervisors supervised the Company’s major decision-making processes

and the performance of duties by the Directors and the senior management by attending such meetings as non-voting

participants.

The Supervisory Committee is of the opinion that the Directors and senior management of the Company are committed

and diligent in performing their duties, have duly implemented the resolutions of the general meetings, adhered to the

lawful operations and cautious decision-making, and contributed greatly to the production and operation results of the

Company.

During the reporting period, the Supervisory Committee regularly reviewed the relevant financial information of the Group

and the auditor’s report of the Group issued by the auditor, and confirmed that the accounts and audit work of the Group

were in compliance with the requirements of Accounting Law of the PRC, the accounting system issued by the Ministry

of Finance of the PRC and the Hong Kong Financial Reporting Standards and the Supervisory Committee was not aware

of any non-compliance.

The Supervisory Committee has duly reviewed the financial report for 2013 audited by the independent auditor with

unqualified opinion, and considers that the report accurately, truly and fairly presented the financial position and the

results of operations of the Company on a consistent basis.


SUPERVISORY COMMITTEE’S REPORT

The Supervisory Committee confirms that the connected transactions between the Company and the Parent conducted

during the reporting period were fair and reasonable and in the interests of the other shareholders and the Company as

a whole. The Directors, president and other senior management of the Company have strictly complied with the principle

of diligence, exercised powers delegated by the shareholders diligently and performed all responsibilities, and no abuse

of authority that would jeopardize the interests of shareholders and the legal rights of employees of the Company has

been identified.

The Supervisory Committee is fully confident about the development prospects of the Company. In 2014, the Supervisory

Committee will continue to perform all its duties to protect the interests of the shareholders in strict accordance with

the Articles of Association of the Company and relevant requirements.


CORPORATE GOVERNANCE REPORT

CORPORATE GOVERNANCE

During the reporting period, the Company established a standard and sophisticated corporate governance structure

in strict compliance with laws and regulations such as the Company Law of the People’s Republic of China and the

Securities Law of the People’s Republic of China and the requirements of domestic and foreign regulatory bodies. The

Company is committed to maintaining its corporate governance at a high standard to enhance the Shareholders’ value in

the long run.

CORPORATE GOVERNANCE STRUCTURE

Nomination Committee

Remuneration Committee

Audit Committee

Strategy Committee

Management

Board

Supervisory Committee

General Meeting

CORPORATE GOVERNANCE DOCUMENTS

Currently, the documents governing the corporate governance practices of the Company include but are not limited to

the followings:

1. Articles of Association

2. Rules of Procedures for General Meetings

3. Rules of Procedures for the Board

4. Rules of Procedures for the Supervisory Committee

5. Rules of Procedures for the Strategy Committee



6. Rules of Procedures for the Audit Committee

7. Rules of Procedures for the Remuneration Committee

8. Rules of Procedures for the Nomination Committee

9. Working System for Independent Directors

10. Administrative System for Information Disclosure

11. Administrative System for Connected Transactions

12. Administrative System for Investor Relations

13. Rules of Internal Auditing

14. Internal Control Audit Method

15. Financial Management System

During the reporting period, the Board reviewed and proposed to amend a series of corporate governance documents,

including the Articles of Association, the Rules of Procedure of the General Meeting, the Rules of Procedure for the

Board, the Rules of Procedures for the Audit Committee, the Rules of Procedures for the Remuneration Committee

and the Rules of Procedures for the Nomination Committee, and monitored the implementation of these documents

from time to time; reviewed and keenly organised professional training and continuous professional development for

the Directors and Senior Management; reviewed and monitored the Company whether there was any violation of laws

and regulatory requirements; approved the Corporate Governance Report for the year 2012, as well as the disclosures

made on the website of Hong Kong Stock Exchange and the Company Website; formulated, reviewed and supervised

shareholders’ communication policies to ensure their effectiveness.

The Board has reviewed the corporate governance documents adopted by the Company as stated above and is of the

view that the requirements in the documents have complied with all the code provisions as set out in the “Corporate

Governance Code” and “Corporate Governance Report” contained in Appendix 14 of the Listing Rules and are consistent

with most of the recommended best practices set out therein.

The code on corporate governance adopted by the Company is more stringent in the following aspects than the code

provisions as set out in the “Corporate Governance Code” and “Corporate Governance Report”:

1. In addition to the Audit Committee, the Remuneration Committee and the Nomination Committee, the Company

has also established the Strategy Committee.

2. The Company’s Rules of Procedures for the Board requires the independent non-executive Directors to review, at

least once a year, the information provided by the Company’s controlling shareholder in relation to the compliance

with and enforcement of the non-competition agreement.



“CORPORATE GOVERNANCE CODE” AND “CORPORATE GOVERNANCE REPORT”

For the year ended 31 December 2013, the Company has fully complied with the code provisions as set out in the “Corporate

Governance Code” and “Corporate Governance Report”.

.

SECURITIES TRANSACTIONS BY DIRECTORS

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”)

as set out in Appendix 10 of the Listing Rules, and requires that securities transactions by Directors and Supervisors be

conducted in compliance with the Model Code, which is also applicable to the senior management of the Company. After

the specific enquiries made by the Company, all Directors and Supervisors have confirmed that they had fully complied

with the Model Code throughout the year of 2013.

BOARD OF DIRECTORS

The composition of the Board and relevant information are set out below:

Name Position Gender Age Term

LIU Zhijiang Executive Director and

Chairman of the Board Male 56 30 July 2013 to 29 July 2016

YU Shiliang Non-executive Director Male 59 30 July 2013 to 29 July 2016

LI Xinhua Executive Director, Vice-chairman of the Board and President Male 49 30 July 2013 to 29 July 2016

ZHANG Hai Non-executive Director Male 55 30 July 2013 to 29 July 2016

LI Jianlun Non-executive Director Male 56 30 July 2013 to 29 July 2016

YU Guobo Non-executive Director Male 57 30 July 2013 to 29 July 2016

TANG Baoqi Non-executive Director Male 54 30 July 2013 to 29 July 2016

LEUNG Chong Shun Independent Non-executive Director Male 48 30 July 2013 to 29 July 2016

LU Zhengfei Independent Non-executive Director Male 50 30 July 2013 to 29 July 2016

WANG Shimin Independent Non-executive Director Male 65 30 July 2013 to 29 July 2016

ZHOU Zude Independent Non-executive Director Male 68 30 July 2013 to 29 July 2016

The Board is the standing decision-making body of the Company and leads and supervises the Company in a responsible

and efficient manner. All the Directors are obliged to act in the best interest of the Company. Members of the Board

understand that they jointly and severally take responsibility to all the shareholders for matters in relation to the

management, supervision and operation of the Company.

The Board mainly decides on the following matters:

• toformulatetheCompany’sstrategyandpolicy;

• toestablishthemanagement’starget;

• tosupervisetheperformanceofthemanagement;and

• to ensure theCompany’s implementationof a prudent andeffectivemonitoring structure to assess andmanage

risks.



It is the responsibility of the Board to prepare the financial statements for each fiscal year to give a true and fair view of the financial status of the Company and the results and cash flow during the relevant period. When preparing the financial statements for the year ended 31 December 2013, the Board selected and applied appropriate accounting policies and made prudent, fair and reasonable judgment and estimates to prepare the financial statements on the basis of going concern. The Board is responsible for properly maintaining and reasonably and accurately disclosing at any time the accounting records of the financial information of the Company. The Board will convene meetings at least four times per year and whenever important decisions have to be made.

The Company’s management comprises one president, several vice presidents and a CFO. The president is responsible to the Board and shall mainly perform the following functions:

(1) to be in charge of the production, operation and management of the Company and to report to the Board;

(2) to organize the implementation of the resolutions of the Board;

(3) to organize the implementation of the annual business plan and investment program of the Company;

(4) to prepare plans for the Company’s proposed annual financial budgets and final accounts, and to make recommendation to the Board;

(5) to prepare plans for the reform, division, restructuring and dissolution of Company’s wholly owned subsidiaries and non-wholly owned subsidiaries;

(6) to prepare plans for the establishment of the internal management structure of the Company;

(7) to prepare plans for the establishment of the branch bodies of the Company;

(8) to prepare the basic management systems of the Company;

(9) to formulate specific rules and regulations of the Company;

(10) to propose the appointment or dismissal of the vice president(s) and the CFO of the Company to the Board;

(11) to appoint or dismiss principal management personnel other than those required to be appointed or dismissed by the Board;

(12) to prepare plans for the salaries, welfares and rewards and penalty for the staff of the Company, and to make decisions on the appointment or dismissal of the Company’s staff;

(13) to propose to convene an extraordinary Board meeting in the event of emergency;

(14) to decide on the establishment of branch bodies and representative offices of the Company’s wholly owned subsidiaries and non-wholly owned subsidiaries;

(15) to decide on matters relating to the Company’s investment, financing, contracts or transaction within the scope authorized by the Board; and

(16) Other functions and powers conferred by the Articles of Association and the Board.



During the reporting period, Mr. YU Shiliang (from 1 January 2013 to 5 February 2013) and then Mr. LIU Zhijiang (from

5 February 2013) served as chairmen of the Board, Mr. LI Xinhua served as the president. Chairman of the Board and

president are two different positions which are clearly delineated. The chairman of the Board shall not concurrently serve

as the president of the Company. The responsibilities between the chairman of the Board and the president shall be

clearly separated and defined in written form. The chairman of the Board is responsible for managing the operation of

the Board while the president is responsible for the business operation of the Company. The Articles of Association sets

out in detail the respective responsibilities of the chairman of the Board and the president. Senior management of the

Company, other than the Directors and the Supervisors, is responsible for the daily business operation of the Company.

Their positions are set out in the section of “Biography of Directors, Supervisors and Senior Management” in this annual

report.

All Directors are required to declare any direct or indirect interest involved in any matter or transaction to be considered

at Board meetings, and interested Directors shall abstain from the meeting when appropriate. Directors are required by

the Company to provide details in relation to any connected transactions that they or their respective associates entered

into with the Company or its subsidiaries for each financial period and make confirmations regarding the same.

A total of ten Board meetings were convened during 2013. The individual members’ attendance rate of Board meetings

is as follows:

Directors

Number of

Attendance

Number of

Attendance

by proxy Attendance Rate

LIU Zhijiang 10 0 100%

YU Shiliang 10 0 100%

LI Xinhua 10 0 100%

ZHANG Hai 10 0 100%

LI Jianlun 5 0 100%

YU Guobo 5 0 100%

TANG Baoqi 10 0 100%

LEUNG Chong Shun 10 0 100%

SHI Chungui 5 0 100%

LU Zhengfei 10 0 100%

WANG Shimin 10 0 100%

ZHOU Zude 10 0 100%

Note:

Mr. LI Jianlun and Mr. YU Guobo were appointed as the non-executive Directors of the Company on 30 July 2013. During their term of

office, Mr. LI and Mr. YU attended all the five meetings of the Board in person.

Mr. SHI Chungui ceased to be the non-executive Director of the Company on 30 July 2013. During his term of office,

Mr. SHI attended all the five meetings of the Board in person.



Since the incorporation of the Company on 31 July 2007, the Board has been complying with Rule 3.10(1) of the Listing

Rules, which requires a minimum of three independent non-executive directors, Rule 3.10A, which requires independent

non-executive directors representing at least one-third of the board, and Rule 3.10(2), which requires that at least one

of the independent non-executive directors must have appropriate professional qualifications or accounting or related

financial management expertise.

A total of two general meetings were convened during 2013. The attendance rate of the Directors is as follows:

Directors

Number of

Attendance Attendance Rate

LIU Zhijiang 2 100%

YU Shiliang 2 100%

LI Xinhua 2 100%

ZHANG Hai 2 100%

LI Jianlun – –

YU Guobo – –

TANG Baoqi 2 100%

LEUNG Chong Shun 2 100%

SHI Chungui 1 50%

LU Zhengfei 2 100%

WANG Shimin 2 100%

ZHOU Zude 2 100%

Note:

Mr. LI Jianlun and Mr. YU Guobo were appointed as the non-executive Directors of the Company on 30 July 2013. Since then and until

the end of the reporting period, no general meeting was convened by the Company.

In accordance with the requirements of the Listing Rules, the Company made the following confirmation as to the

independence of the independent non-executive Directors: the Company has accepted the confirmation letter from each

of the independent non-executive Directors and confirms their compliance with the independence requirements as set

out in Rule 3.13 of the Listing Rules. The Company is of the view that all the independent non-executive Directors are

independent parties.

Each of the independent non-executive Directors shall have a term of office of three years and is eligible for re-election

and re-appointment. Independent non-executive Directors who intend to continue to be appointed after holding office

for nine consecutive years are subject to the verification of independence. Independent non-executive Directors shall

not be removed without reasonable ground prior to the expiry of their terms of office. The Company shall make special

disclosure for any early removal of any independent non-executive Director.

Other than their duties in the Company, the Directors, the Supervisors and senior management do not have any

relationship among themselves in financial, business, family or other material aspects.



During the reporting period, all Directors proactively participated in continuous professional training including the

professional training provided by the Company and developed and updated their knowledge and skills in a move to

ensure that their contribution to the Board remained completely informed and relevant.

Other than their service contracts, the Directors and the Supervisors do not have any direct or indirect personal beneficial

interest in the contracts of significance entered into by the Company or any of its subsidiaries in 2013.

The Company has established the Strategy Committee, the Audit Committee, the Remuneration Committee and the

Nomination Committee under the Board.

STRATEGY COMMITTEE

The composition and the changes of the Strategy Committee during the reporting period are set out below:

Chairman Member

1 January 2013 to 5 February 2013 YU Shiliang LIU Zhijiang, LI Xinhua, ZHOU Zude

5 February 2013 to 30 July 2013 LIU Zhijiang YU Shiliang, LI Xinhua, ZHOU Zude

From 30 July 2013 LIU Zhijiang YU Shiliang, LI Xinhua, ZHANG Hai, LI Jianlun,

YU Guobo, ZHOU Zude

The Strategy Committee considers, evaluates, reviews and recommends to the Board the proposed major investments,

acquisitions and disposals and conducts post-investment evaluation of investment projects, and reviews and considers

the overall strategic direction of the Company and business developments of the Company.

During the reporting period, the Strategy Committee convened one meeting. All the members of the committee attended

the meeting. At the third meeting of the second session of the Strategy Committee held on 20 March 2013, the Work

Report of the President of China National Materials Company Limited for 2012 was approved and the financial budget (draft)

and investment budget (draft) of the Company for 2013 was considered and then submitted to the thirty-first meeting of

the second session of the Board for approval.

AUDIT COMMITTEE

The composition and changes of the Audit Committee during the reporting period are set out below:

Chairman Member

1 January 2013 to 5 February 2013 LU Zhengfei WANG Shimin, LIU Zhijiang

From 5 February 2013 LU Zhengfei WANG Shimin, YU Shiliang

The primary duty of the Audit Committee is to examine and supervise the financial reporting procedures and internal

control system of the Company and provide advice and comments to the Board.

From the date of the Company’s listing on the Hong Kong Stock Exchange and up to 31 December 2013, the Company

has been in full compliance with the requirements of Rule 3.21 of the Listing Rules.



Pursuant to the requirements of the Rules of Procedures of the Audit Committee, a total of four meetings were held

for the year. At the fourteenth meeting of the second session of the Audit Committee held on 18 March 2013, the

resolution regarding the submission of the 2012 audited financial report to the Board and the resolution regarding the

appointment of ShineWing Certified Public Accountant LLP and SHINEWING (HK) CPA Limited as the domestic and

international auditors respectively for 2013 were considered. At the fifteenth meeting of the second session of the Audit

Committee held on 24 April 2013, the resolution regarding the submission of the 2013 Q1 financial report to the Board

was considered. At the first meeting of the third session of the Audit Committee held on 20 August 2013, the resolution

regarding the submission of the 2013 interim financial report to the Board was considered. At the second meeting of

the third session of the Audit Committee held on 24 October 2013, the resolution regarding the submission of the 2013

Q3 financial report to the Board was considered. All the members of the Audit Committee attended the above four

meetings.

REMUNERATION COMMITTEE

The composition and the changes of the Remuneration Committee during the reporting period are set out below:

Chairman Member

1 January 2013 to 30 July 2013 SHI Chungui LEUNG Chong Shun, LU Zhengfei

From 30 July 2013 WANG Shimin LEUNG Chong Shun, LU Zhengfei

The primary duties of the Remuneration Committee include the recommendation of the remuneration package of the

executive Directors and senior management to the Board; the determination and review of the specific remuneration

package and performance of the Directors and senior management of the Company according to the remuneration and

performance management policy and structure for Directors and senior management established by the Board.

During the reporting period, the Remuneration Committee held two meetings. At the fourth meeting of the second

session of the Remuneration Committee held on 22 March 2013, (1) the resolution regarding the payment proposal on

remuneration for the Company’s senior management for the year 2012 was heard and considered; (2) the administrative

measures on the remuneration of the Company’s senior management were heard and considered; (3) the resolution

regarding the remuneration proposal for the Company’s senior management for the year 2013 was heard and considered.

At the first meeting of the third session of the Remuneration Committee held on 30 July 2013, the resolution regarding

the remuneration proposal of the Directors of the Company was heard and considered. All the members of the

Remuneration Committee attended the above two meetings.



NOMINATION COMMITTEE

The composition and the changes of the Nomination Committee during the reporting period are set out below:

Chairman Member

1 January 2013 to 5 February 2013 YU Shiliang SHI Chungui, ZHOU Zude

5 February 2013 to 30 July 2013 LIU Zhijiang SHI Chungui, ZHOU Zude

From 30 July 2013 LIU Zhijiang WANG Shimin, ZHOU Zude

The Nomination Committee is mainly responsible for reviewing the structure, numbers and composition of the Board and

making recommendations to the Board in relation to any changes; formulating the standards, procedures and methods

for screening candidates for Directors and senior management of the Company and its invested enterprises and making

recommendations to the Board.

During the reporting period, the Nomination Committee held two meetings. At the eighth meeting of the second session

of the Nomination Committee held on 3 February 2013, Mr. LIU Zhijiang was recommended to serve as the chairman of

the Company, and Mr. LI Xinhua was recommended to serve as the vice-chairman of the Company. At the ninth meeting

of the second session of the Nomination Committee held on 20 May 2013, the number of independent non-executive

Directors in the third session of the Board was reduced to four; Mr. LIU Zhijiang and Mr. LI Xinhua were recommended

to serve as the executive Directors of the third session of the Board; Mr. YU Shiliang, Mr. ZHANG Hai, Mr. LI Jianlun,

Mr. YU Guobo and Mr. TANG Baoqi were recommended to serve as the non-executive Directors of the third session of

the Board; and Mr. LEUNG Chong Shun, Mr. LU Zhengfei, Mr. WANG Shimin and Mr. ZHOU Zude were recommended

to serve as the independent non-executive Director of the third session of the Board. All the members of the Nomination

Committee attended the above two meetings.

The Company appoints new Directors according to a transparent procedure which has been duly formulated after prudent

consideration. The nomination of the candidates for directorship is usually submitted as a resolution by the Board to

the general meeting of the Company. The Shareholders and the Supervisory Committee may nominate candidates for

directorship according to the Articles of Association.

BOARD DIVERSITY POLICY

The Board adopt the following board diversity policy:

With a view to achieving a sustainable and balanced development, the Company sees increasing diversity of the Board

as an essential element in supporting the attainment of its strategic objectives and its sustainable development. All the

appointments made by the Board will be based on meritocracy, and candidates will be adequately considered against

objective criteria, together with the benefit to the Board made by the board diversity policy. Selection of Board members

will be based on a range of diversity perspectives, including but not limited to gender, age, cultural and educational

background, professional experience, skills, knowledge and length of service. The ultimate decision will be based on the

specific demand for talents of the various stages in our business development and strategic planning, and also the merits

and contribution to be made by the selected candidates. The composition of the Board (including gender, age and length

of service) will be disclosed in the Corporate Governance Report annually.



CORPORATE GOVERNANCE FUNCTIONS

As approved by the Shareholders at the general meeting of the Company, the Rules of Procedures for the Board was

amended to specify that the Board was responsible for performing the corporate governance functions as follows:

– to develop and review the corporate governance policies and practices of the Company and make

recommendations to the Board;

– to review and monitor the training and continuous professional development of Directors and senior management;

– to review and monitor the Company’s policies and practices on compliance with the legal and regulatory

requirements;

– to develop, review and monitor the code of conduct and compliance manual (if any) applicable to employees and

Directors;

– to review the Company’s compliance with the code and the relevant disclosure in the corporate governance

report;

– to develop policies on communication with the Shareholders and review such policies on a regular basis to ensure

its effectiveness.

During the reporting period, the Board held meetings to (1) review the Company’s compliance with the code and the

relevant disclosure in the corporate governance report; (2) to amend the Articles of Association, Rules of Procedures

for the Board, Administrative System for Information Disclosure, Administrative System for Connected Transactions and

Administrative System for Investor Relations. Furthermore, professional agencies were engaged to provide training for

the Directors and senior management.

AUDITOR’S REMUNERATION

SHINEWING (HK) CPA Limited and ShineWing Certified Public Accountants LLP were respectively appointed as the Hong

Kong auditor and the PRC auditor of the Company for 2013, respectively, and their remuneration was determined by

the Audit Committee of the Board. The auditors’ remuneration for their provision of audit services for 2013 amounted to

RMB9 million. The auditors’ remuneration for their provision of review services on the interim report and profit forecast

in accordance with the Listing Rules of the Hong Kong Stock Exchange for 2013 amounted to RMB1.36 million. For

provision of internal control audit services to the subsidiaries of the Company for 2013 as required by the domestic

regulatory rules, the auditors’ remuneration amounted to RMB1.93 million. Apart from the aforesaid fees, the Group did

not incur any other non-audit fees.

COMPANY SECRETARIES

Mr. GU Chao and Mr. YU Leung Fai, the joint company secretaries of the Company, have confirmed that both of them

had attended relevant professional training for no less than 15 hours during the reporting period.



SHAREHOLDERS’ RIGHT

As the owners of the Company, shareholders of the Company are entitled to the various rights stipulated by laws,

administrative rules and regulations and the Articles of Association. The shareholders’ general meeting is the supreme

authority of the Company, through which shareholders exercise their power. During the reporting period, the Company

held two general meetings.

The Board and senior management of the Company understand that they are representing the overall interest of all the

shareholders of the Company and their first priority is to maintain the stable and continuous growth of shareholders’

value and investment return in the long run and enhance the competitiveness of the business.

According to the Articles of Association, when shareholder(s) alone or in aggregate holding 10% or more of the

Company’s outstanding voting shares request in writing to convene an extraordinary general meeting (the number of

shares held is determined on the day on which the shareholder lodges his/her demand in writing), the extraordinary

general meeting shall be convened within two months. The relevant documents shall state clearly the purpose of such

meeting and shall be served to all the shareholders. Shareholders may suggest to the Board with the procedure for

enquiry and propose such procedure in a general meeting. The contact information of the Company is set out in the

section headed “Corporate Information”.

INTERNAL CONTROL SYSTEM

In order to fulfill the relevant regulatory requirements of the places where the Company is listed and strengthen the

internal control management of the Company, the Company has established a range of internal control management

systems, including the following documents such as “Administrative System for Information Disclosure”, “Administrative

System for Connected Transactions”, “Administrative System for Investor Relations”, “Working System for Independent

Directors”, “Financial Management System”, “Rules of Internal Auditing” and “Internal Control Audit Method”, thus

establishing the internal control system.

The Directors have reviewed the effectiveness of the internal control systems of the Company and its subsidiaries

according to code provision C.2.1 of the “Corporate Governance Code” and “Corporate Governance Report”. The review

covered financial control, operation control and compliance control, and risk management function control.



REVIEW FOR THE YEAR

The Board has analyzed in detail the procedure, method and assessment results of the above internal control review

by reference to the relevant requirements of the Listing Rules, and no significant problem has been identified. The

internal control system can safeguard the safety and integrity of the assets, and enhance the operating efficiency and

effectiveness of the Company. The Company maintained appropriate information, records and procedures, guaranteed

the timeliness, relevance and reliability of the Company’s financial statements and relevant information. It also ensured

that relevant information has been sufficiently disclosed in these financial statements and applicable laws and regulations

have been complied with.

During the reporting period, in light of the practice of development and risk control, the Company strived to optimize

and improve the existing risk management and internal control management system. Furthermore, it prepared, published

and issued the Manual on Comprehensive Risk Management and Internal Control, establishing a relatively sound and

effective comprehensive risk management and internal control system covering the whole Company, so as to enhance

the Company’s ability in risk prevention and control.

The Company conducted risk assessment and improved the risk database; rectified the weaknesses in workflow

organization and perfected the relevant systems; established internal control assessment criteria and included internal

control management of the business units into annual operation performance appraisal, so as to establish an assessment-

oriented internal control working system.

By comprehensively combing the business, the Company improved the internal control framework, categorizing 55

workflow control businesses and 60 non-workflow control businesses. The Company developed management and control

standards for each of the workflow and non-workflow businesses, and completed the preparation and revision of the

Manual on Comprehensive Risk Management and Internal Control. The Company reviewed and analyzed the difference

among the existing 223 items of rules and regulations, adding 16 new rules and 36 revisions which involved 108 key

controlling points. By improving the rules and regulations, optimizing the business workflow, the Company strived to

ensure and promote the implementation of all management systems and the smooth operation of all businesses. During

the reporting period, the Company conducted internal control self-check across the Company, conducting self-check on

the construction of the internal control system of each business unit and made rectification to the problems existing.

INTERNAL AUDIT UNIT

The Company has set up an independent audit department which is responsible for the internal auditing.

During the reporting period, with the audit system focusing on risk management, the Company carried out

comprehensive auditing and highlighted the key points to provide valuable audit results which the Company actively

made use of to facilitate the improvement of the internal control and risk management system of the Group.

Firstly, according to the Company’s requirements of “steadily promoting internal reform, striving to create smooth

communication channels, rationalize management system and improve decision-making efficiency, as well as continuously

enhancing our development vitality and competitiveness”, the Company proactively explored the establishment of a

vertical management system of internal audit, setting up a management system structure in the form of the internal

audit information management system based on responsibility assessment, whose key content aims to improve both

the quality of audit projects and capability of audit staff under the regulatory requirements and restrictions of the system

through the appraisal of audit staff based on the assessment of audit projects.



Secondly, in order to achieve the objective of lowering the cost for efficiency, the Company pushed ahead the audit of

economic responsibilities and enhanced organization governance, risk event management, basic management and audit

on construction projects.

Thirdly, focusing on the operation of the internal control system on risk management, the Group conscientiously carried

out internal control self-assessment. The Group also formulated the Tentative Measures on Implementation of Internal

Control Assessment, which clarifies the definition, principles, obligations, content and procedures of internal control

assessment, criteria for identification of defects and assessment report, provides format for assessment report, and

clearly specifies the quantitative and qualitative criteria for identification of internal control defects. In accordance with

the Tentative Measures on Implementation of Internal Control Assessment, four non-listed companies were selected

for trial assessment on group control and the system of “Three Important and One Large” from May to June 2013. The

Company drew lessons on internal control assessment through the trial assessment, and conducted internal control self-

assessment across the level two or three units under the Company in September 2013.

Fourthly, combining the management difficulties and hot topics, the Company strengthened project specific audit. The

Company conducted three audit investigations and carried out audit on three investment projects. Through audit, the

Company gained experiences and lessons on project management to have a understanding of project risks, so as to

improve the effectiveness of project management.

Fifthly, focusing on the core business and sustainable development of the Company, proactive efforts were made

to identify and make use of the audit findings, so as to realize the value of auditing. In respect of the problems

identified through auditing, the Company pointed out the defects of internal control and the risks involved and provided

management proposals covering specific units, departments and staff. The Company carried out rectification to improve

the capability of corporate governance organs at all levels to perform their duties and responsibilities and prevent risks

arising therefrom.

Investor Relations and Communication with Shareholders

During the reporting period, the Company communicated with its investors and shareholders in a pro-active, honest

and open manner through a number of official channels including holding shareholders’ general meetings, results

announcement meetings, and in-house visits for investors with a view to ensuring fair disclosure of the Group’s

performance and business and making comprehensive and transparent reports.

Shareholders’ general meetings not only make decisions on major matters of the Company, but also provide direct

communication channels among the Directors, the management and the shareholders. Therefore, the Company highly

values shareholders’ general meetings and sends notices of such meetings 45 days prior to the meetings which set out

the procedures for voting by poll and the rights of shareholders to demand to vote by poll in accordance with the Listing

Rules. During the reporting period, the Company held two shareholders’ general meetings at which major matters of

the Company were considered, such as 2012 audited financial report, profit distribution, re-election of the Board and

continuing connected transactions etc.

The Company highly values investor relations and has set up a special telephone and electronic mail box for investors.

The Company received enquiries from institutional investors by way of telephone and emails, and received over 450

visits from institutional investors; and ran two results releases and international non-deal road shows, and visited over

100 investors during the year. Through communication with the investors, the Company enables investors to have a full

understanding of its various financial and operating information and its latest development timely.



The Company issues annual report and interim report and dispatches them to the shareholders. The Company also publishes its announcements, circulars and press releases on its website at www.sinoma-ltd.cn.

To provide more effective channels of communication, the Company updates its website from time to time and releases corporate information and other related financial and non-financial information on its website when appropriate.

ARTICLES OF ASSOCIATION

During the reporting period, the following changes have been made to the Articles of Association of the Company with the approval from the Company’s general meetings held on 24 May 2013 and 30 July 2013:

1. Article 10 has been amended as follows:

“The scope of business of the Company shall be subject to that approved by the registration authority of the Company.

The scope of business of the Company includes:

Permitted business referred to contracting overseas projects compatible with the Company’s capability, scale and performance, and the overseas dispatch of the labors undertaking the above-mentioned overseas projects. General business referred to the research, development, production and sale of inorganic non-metal materials; the design, production and sale of inorganic non-metal materials appliances; general project contractor; consultation and design of projects; business of import and export; the tenancy trade of mechanical plants and sales of parts for construction projects and mining, the related technical consultation and professional services for the above mentioned businesses.

The Company could base on the domestic and foreign market situations, the development of business and the self-capacity to adjust its scope of business, and handle the relevant procedures for adjustment in accordance with the regulations.”

2. Article 97 has been amended as follows:

“The Company shall have a Board of Directors of the Company. The Board of Directors of the Company shall comprise 11 directors, of which at least 1/3 are independent directors. Independent directors may directly report to shareholders’ general meeting, securities regulatory managing authority under the State Council and other related departments.

The Board of Directors shall comprise one chairman and one vice chairman. The chairman and the vice chairman shall be elected and dismissed by all directors with over half of the votes. The term of office of the chairman and vice chairman shall be three years, after which the chairman and the vice chairman shall be eligible for re-election and re-appointment.

The director does not need to hold shares of the Company.

The number of the chairman, vice chairman and executive directors of the controlling shareholders acting as the chairman, vice chairman and executive directors of the Company shall not exceed two.”

For details, please refer to the circulars published by the Company on 9 April 2013 and 7 June 2013 on the websites of the Company and the Hong Kong Stock Exchange.


INDEPENDENT AUDITOR’S REPORT

TO THE SHAREHOLDERS OF

CHINA NATIONAL MATERIALS COMPANY LIMITED

(Incorporated in the People’s Republic of China with limited liability)

We have audited the consolidated financial statements of China National Materials Company Limited (the “Company”)

and its subsidiaries (collectively referred to as the “Group”) set out on pages 65 to 264, which comprise the

consolidated statement of financial position as at 31 December 2013, and the consolidated statement of profit or loss,

consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity

and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and

other explanatory information.

DIRECTORS’ RESPONSIbILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS

The directors of the Company are responsible for the preparation of consolidated financial statements that give a true

and fair view in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified

Public Accountants and the disclosure requirements of the Hong Kong Companies Ordinance, and for such internal

control as the directors determine is necessary to enable the preparation of consolidated financial statements that are

free from material misstatement, whether due to fraud or error.

AuDITOR’S RESPONSIbILITY

Our responsibility is to express an opinion on these consolidated financial statements based on our audit and to report

our opinion solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We

do not assume responsibility towards or accept liability to any other person for the contents of this report. We conducted

our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public

Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain

reasonable assurance as to whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated

financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the

risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those

risk assessments, the auditor considers internal control relevant to the entity’s preparation of consolidated financial

statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances,

but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also

includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates

made by the directors, as well as evaluating the overall presentation of the consolidated financial statements.


INDEPENDENT AUDITOR’S REPORT

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OPINION

In our opinion, the consolidated financial statements give a true and fair view of the state of affairs of the Group as at

31 December 2013 and of the Group’s profit and cash flows for the year then ended in accordance with Hong Kong

Financial Reporting Standards and have been properly prepared in accordance with the disclosure requirements of the

Hong Kong Companies Ordinance.

SHINEWING (HK) CPA Limited

Certified Public AccountantsLo Wa Kei

Practising Certificate Number: P03427

Hong Kong

28 March 2014


For the year ended 31 December 2013

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

2013 2012

Notes RMB’000 RMB’000(Restated)

Turnover 8 52,081,316 46,187,071

Cost of sales (42,069,189) (37,829,045)

Gross profit 10,012,127 8,358,026

Interest income 10 139,248 170,088

Other gains 11 1,391,835 1,452,558

Selling and marketing expenses (1,822,560) (1,553,642)

Administrative expenses (5,450,365) (4,651,292)

Exchange (loss) gain 12 (85,263) 1,687

Other expenses 13 (53,317) (31,807)

Finance costs 14 (1,961,946) (1,683,513)

Share of results of associates 66,353 7,365

Share of results of joint ventures (27,269) (10,674)

Profit before tax 2,208,843 2,058,796

Income tax expense 15 (743,432) (512,956)

Profit for the year 16 1,465,411 1,545,840


Owners of the Company 397,512 452,293

Non-controlling interests 1,067,899 1,093,547

1,465,411 1,545,840

Earnings per share – basic and diluted (expressed in RMB per share) 20 0.111 0.127



CONSOLIDATED STATEMENT OF PROFIT OR LOSSAND OTHER COMPREHENSIVE INCOME

2013 2012

RMB’000 RMB’000(Restated)

Profit for the year 1,465,411 1,545,840

Other comprehensive (expenses) income

Items that will not be subsequently reclassified

to profit or loss:

Actuarial loss on defined benefit obligations (16,195) (6,103)

Income tax relating to actuarial loss on

defined benefit obligations 4,425 1,831

(11,770) (4,272)

Items that may be reclassified subsequently to profit or loss:

Safety fund set aside 137,510 125,077

Utilisation of safety fund (83,577) (58,973)

Exchange differences arising on translation (45,079) (13,474)

Loss on fair value changes of available-for-sale financial assets (301,858) (59,790)

Income tax relating to fair value changes

of available-for-sale-financial assets 76,300 16,245

(216,704) 9,085

Other comprehensive (expenses) income for the year (net of tax) (228,474) 4,813

Total comprehensive income for the year 1,236,937 1,550,653

Total comprehensive income attributable to:

Owners of the Company 169,069 419,721

Non-controlling interests 1,067,868 1,130,932

1,236,937 1,550,653



CONSOLIDATED STATEMENT OF FINANCIAL POSITION

31 December 2013

31 December 2012

1 January2012

Notes RMB’000 RMB’000 RMB’000(Restated) (Restated)

Non-current assets Property, plant and equipment 21 45,210,186 41,286,046 34,211,249 Prepaid lease payments 22 3,853,959 3,431,436 3,153,457 Investment properties 23 176,004 173,315 184,564 Intangible assets 24 721,844 738,371 501,651 Mining rights 26 512,945 483,087 477,166 Interests in associates 27 863,718 1,393,906 1,266,810 Interests in joint ventures 28 134,238 162,496 174,970 Available-for-sale financial assets 29 2,022,555 2,288,320 2,351,946 Deposits paid for acquisition of subsidiaries – – 101,400 Trade and other receivables 32 87,611 84,132 75,846 Other non-current assets 220,328 252,728 237,982 Deferred income tax assets 45 832,197 704,437 593,966

54,635,585 50,998,274 43,331,007

Current assets Inventories 31 8,773,280 8,393,346 8,131,648 Trade and other receivables 32 21,594,044 16,647,778 15,664,360 Amounts due from customers for contract work 33 599,010 562,674 341,073 Prepaid lease payments 22 131,052 119,028 100,548 Derivative financial instruments 30 21,169 4,708 3,165 Other current assets 107,875 69,542 35,180 Restricted bank balances 34 1,379,963 1,974,089 1,919,043 Bank balances and cash 35 7,270,055 9,235,267 10,291,299

39,876,448 37,006,432 36,486,316 Assets classified as held for sale – – 117,426

39,876,448 37,006,432 36,603,742

Current liabilities Trade and other payables 36 28,453,138 24,983,094 22,815,894 Dividend payable 8,117 7,936 3,231 Amounts due to customers for contract work 33 343,066 292,648 131,295 Derivative financial instruments 30 – 657 138 Income tax liabilities 426,190 433,135 606,538 Short-term financing bills 37 2,900,000 400,000 800,000 Borrowings 38 16,257,821 15,749,447 13,466,246 Early retirement and supplemental benefit obligations 39 50,897 49,114 44,525 Provisions 41 25,060 48,724 41,398

48,464,289 41,964,755 37,909,265 Liabilities classified as held for sale – – 12,038

48,464,289 41,964,755 37,921,303

Net current liabilities (8,587,841) (4,958,323) (1,317,561)

Total assets less current liabilities 46,047,744 46,039,951 42,013,446



CONSOLIDATED STATEMENT OF FINANCIAL POSITION

31 December

2013

31 December

2012

1 January

2012

Notes RMB’000 RMB’000 RMB’000(Restated) (Restated)

Non-current liabilities

Trade and other payables 36 4,034 4,645 4,120

Derivative financial instruments 30 – – 775

Corporate bonds 42 2,492,782 2,490,239 2,487,829

Medium-term notes 43 5,755,339 5,253,610 4,352,670

Borrowings 38 7,931,426 9,280,599 9,641,003

Provisions 41 56,460 44,788 44,874

Deferred income 44 764,333 688,903 446,482

Early retirement and supplemental

benefit obligations 39 266,371 282,752 297,813

Deferred income tax liabilities 45 608,842 697,199 707,858

17,879,587 18,742,735 17,983,424

NET ASSETS 28,168,157 27,297,216 24,030,022

Capital and reserves

Share capital 46 3,571,464 3,571,464 3,571,464

Reserves 47 7,833,772 7,906,308 7,650,061

Equity attributable to owners of the Company 11,405,236 11,477,772 11,221,525

Non-controlling interests 16,762,921 15,819,444 12,808,497

TOTAL EQUITY 28,168,157 27,297,216 24,030,022

The consolidated financial statements on pages 65 to 264 were approved and authorised for issue by the board of

directors on 28 March 2014 and are signed on its behalf by:

LIU Zhijiang LI Xinhua

Director Director



CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Attributable to owners of the Company

Sharecapital

Sharepremium

Capitalreserve

Statutorysurplusreserve

Safetyfund

Foreignexchange

reserve

Investmentrevaluation

reserveOther

reservesRetainedearnings Total

Non-controlling

interestsTotal

equityRMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

(Note (i)) (Note (ii))

At 1 January 2012, as originally reported 3,571,464 3,273,160 (876,924) 75,828 86,666 (12,523) 1,255,685 (71,828) 3,676,477 10,978,005 12,805,054 23,783,059Effect of charges in accounting policies (Note 3) – – – – – – – (54,534) 57,089 2,555 120 2,675Effect of adopting merger accounting for common control combination – – 124,184 – – – – 147,925 (31,144) 240,965 3,323 244,288

At 1 January 2012, as restated 3,571,464 3,273,160 (752,740) 75,828 86,666 (12,523) 1,255,685 21,563 3,702,422 11,221,525 12,808,497 24,030,022

Profit for the year – – – – – – – – 452,293 452,293 1,093,547 1,545,840Other comprehensive income (expenses)Actuarial loss on defined benefit obligations – – – – – – – (3,400) – (3,400) (2,703) (6,103)Income tax relating to actuarial loss on defined benefit obligations – – – – – – – 1,457 – 1,457 374 1,831Safety fund set aside – – – – 77,666 – – – – 77,666 47,411 125,077Utilisation of safety fund – – – – (49,951) – – – – (49,951) (9,022) (58,973)Exchange differences arising on translation – – – – – (7,685) – – – (7,685) (5,789) (13,474)(Loss) gain on fair value changes of available-for-sale financial assets – – – – – – (68,160) – – (68,160) 8,370 (59,790)Income tax relating to fair value changes of available-for-sale financial assets – – – – – – 17,501 – – 17,501 (1,256) 16,245

Total comprehensive income (expenses) for the year – – – – 27,715 (7,685) (50,659) (1,943) 452,293 419,721 1,130,932 1,550,653

Dividends paid to non-controlling interests – – – – – – – – – – (730,668) (730,668)Contributions received from non-controlling interests – – – – – – – – – – 2,404,024 2,404,024Acquisition of a subsidiary (Note 48(b)(ii)) – – – – – – – – – – 105,235 105,235Disposal of subsidiaries (Note 50) – – – – – – – – – – (33,224) (33,224)Transactions with non-controlling interests (Note (v)) – – – – – – – 208,150 – 208,150 134,648 342,798Government contributions (Note (iii)) – – – – – – – 40,712 – 40,712 – 40,712Dividend recognised as distribution – – – – – – – – (214,288) (214,288) – (214,288)Merger reserves arising from common control combination – – (198,048) – – – – – – (198,048) – (198,048)Appropriation to statutory surplus reserve – – – 45,802 – – – – (45,802) – – –

At 31 December 2012, as restated 3,571,464 3,273,160 (950,788) 121,630 114,381 (20,208) 1,205,026 268,482 3,894,625 11,477,772 15,819,444 27,297,216




Attributable to owners of the Company

Share

capital

Share

premium

Capital

reserve

Statutory

surplus

reserve

Safety

fund

Foreign

exchange

reserve

Investment

revaluation

reserve

Other

reserves

Retained

earnings Total

Non-

controlling

interests

Total

equity

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000(Note (i)) (Note (ii))

At 1 January 2013, as restated 3,571,464 3,273,160 (950,788) 121,630 114,381 (20,208) 1,205,026 268,482 3,894,625 11,477,772 15,819,444 27,297,216

Profit for the year – – – – – – – – 397,512 397,512 1,067,899 1,465,411

Other comprehensive income (expenses)

Actuarial loss on defined

benefit obligations – – – – – – – (15,531) – (15,531) (664) (16,195)

Income tax relating to actuarial loss

on defined benefit obligations – – – – – – – 4,291 – 4,291 134 4,425

Safety fund set aside – – – – 97,545 – – – – 97,545 39,965 137,510

Utilisation of safety fund – – – – (57,911) – – – – (57,911) (25,666) (83,577)

Exchange differences arising

on translation – – – – – (26,661) – – – (26,661) (18,418) (45,079)

(Loss) gain on fair value changes of

available-for-sale financial assets – – – – – – (307,290) – – (307,290) 5,432 (301,858)

Income tax relating to fair value

changes of available-for-sale

financial assets – – – – – – 77,114 – – 77,114 (814) 76,300

Total comprehensive income

(expenses) for the year – – – – 39,634 (26,661) (230,176) (11,240) 397,512 169,069 1,067,868 1,236,937

Dividends paid to

non-controlling interests – – – – – – – – – – (314,185) (314,185)

Acquisition of subsidiaries

(Note 48(a)(i) & (ii)) – – – – – – – – – – 139,742 139,742

Transactions with non-controlling

interests (Note (iv)) – – – – – – – 359,228 – 359,228 50,052 409,280

Government contributions (Note (iii)) – – – – – – – 21,880 – 21,880 – 21,880

Dividend recognised as distribution – – – – – – – – (107,144) (107,144) – (107,144)

Merger reserves arising from

common control combination – – (515,569) – – – – – – (515,569) – (515,569)

Appropriation to statutory

surplus reserve – – – 5,814 – – – – (5,814) – – –

Capitalisation of reserve (Note (vi)) – – 30,815 – – – – (30,815) – – – –

At 31 December 2013 3,571,464 3,273,160 (1,435,542) 127,444 154,015 (46,869) 974,850 607,535 4,179,179 11,405,236 16,762,921 28,168,157




Notes:

(i) Pursuant to certain regulations issued by the State Administration of Work Safety of the People’s Republic of China (the “PRC”),

the Group is required to set aside an amount to a safety fund. The fund can be used for improvements of safety at the mines

and construction sites, and is not available for distribution to owners.

(ii) Other reserves mainly comprise of reserves from transactions with the non-controlling interests, deemed contributions from

owners of the Company, government contributions and actuarial gain or loss on defined benefit obligations.

(iii) During the year ended 31 December 2013, national funds of approximately RMB21,880,000 (2012: RMB40,712,000) are

contributed by the PRC Government to the Group. Such funds are used specifically for energy saving and emission reduction and

key industries construction projects.

Pursuant to the requirements of the relevant notice, the national funds are designated as capital contribution and vested solely

with the PRC Government. They are non-repayable and can be converted to share capital of the entities receiving the funds upon

approval by their shareholders and completion of other procedures.

(iv) During the year ended 31 December 2013, the Group received RMB409,280,000 to dispose of certain equity interests in

non-wholly owned subsidiaries with a carrying amount of non-controlling interests prior to disposal of the equity interests of

RMB50,052,000.

(v) During the year ended 31 December 2012, the Group received RMB342,798,000 to dispose of certain equity interests in

non-wholly owned subsidiaries with a carrying amount of non-controlling interests prior to disposal of the equity interests of

RMB134,648,000.

(vi) During the year ended 31 December 2013, prior to the effective date of combination of the subsidiaries under common control (Note

49), capital reserves of RMB30,815,000 were converted into paid-in capital of these subsidiaries under common control.



CONSOLIDATED STATEMENT OF CASH FLOWS

2013 2012RMB’000 RMB’000

(Restated)

OPERATING ACTIVITIES

Profit before tax 2,208,843 2,058,796Adjustments for: Allowance for inventories 147,997 81,566 Amortisation of intangible assets 39,340 33,695 Amortisation of mining rights 49,673 43,463 Amortisation of prepaid lease payments 86,439 111,322 Depreciation of property, plant and equipment 3,092,117 2,590,450 Depreciation of investment properties 11,987 11,249 Dividend income on available-for-sale financial assets (23,883) (20,727) Gain on a bargain purchase – (1,619) Gain on debts restructuring (44,250) (14,962) Finance costs 1,961,946 1,683,513 Foreseeable losses on construction contracts 58,348 55,298 Government grants (314,334) (268,766) Impairment loss recognised in respect of property, plant and equipment 240,126 24,899 Impairment loss recognised in respect of intangible assets 139,013 – Impairment loss recognised in respect of trade receivables 743,363 336,945 Impairment loss recognised in respect of prepayments to suppliers and subcontractors and other receivables 320,088 347,536 Impairment loss recognised in respect of loan receivables 8,513 4,573 Impairment loss recognised in respect of available-for-sale financial assets 5,330 1,728 Interest income (139,248) (170,088) Changes in fair value of foreign currency forward contracts (4,895) (3,946) Exchange gain on realisation of foreign currency forward contracts (14,700) (4,002) Loss on deemed disposal of an associate 29,480 – Net gain on disposal of property, plant and equipment (25,810) (19,209) Net gain on disposal of prepaid lease payments – (1,698) Net gain on disposal of associates (26,024) (2,546) Net gain on disposal of subsidiaries – (165,094) Net gain on disposal of available-for-sale financial assets (2,362) (2,873) Reversal of allowance for inventories (12,205) (10,534) Reversal of impairment loss in respect of other receivables (25,000) –

Reversal of provision for litigation (27,780) – Safety fund set aside 137,510 125,077 Cash-settled share based payments (871) (459) Share of results of associates (66,353) (7,365) Share of results of joint ventures 27,269 10,674 Utilisation/amortisation of government grants (212,814) (205,485) Waiver of other payables (9,818) (9,176)

Operating cash flows before movements in working capital 8,357,035 6,612,235




2013 2012Note RMB’000 RMB’000

(Restated)

Operating cash flows before movements in working capital Increase in inventories (355,490) (153,883) Increase in trade and other receivables (8,387,677) (4,514,021) Increase in contracts work-in-progress (44,266) (115,546) Decrease (increase) in other current and non-current assets 47,000 (52,354) Increase in trade and other payables 1,883,767 806,363 Increase in provisions 15,788 7,240 Decrease in early retirement and supplemental benefit obligations (30,793) (16,575) Decrease in safety fund (83,577) (58,973)

Cash generated from operations 1,401,787 2,514,486Income tax paid (904,858) (922,128)

NET CASH FROM OPERATING ACTIVITIES 496,929 1,592,358

INVESTING ACTIVITIES Purchase of property, plant and equipment (2,935,522) (4,913,626) Purchase of prepaid lease payments (457,083) (344,819) Purchase of mining rights (50,700) (33,860) Purchase of investment properties (14,676) – Increase in investments in associates – (150,000) Purchase of available-for-sale financial assets (42,182) – Receipt from net gain arising from foreign currency forwards contracts 2,477 6,149 (Advance to) repayment of loan receivables (19,245) 2,801 Purchase of intangible assets (50,184) (123,855) Decrease (increase) in restricted bank balances 594,126 (55,046) Payments for common control business combination (515,569) (198,048) Interest received on bank deposits and loan receivables 141,280 171,669 Proceeds from disposals of property, plant and equipment 674,073 57,441 Proceeds from disposals of prepaid lease payments – 75,215 Proceeds from disposals of an associate 260,020 31,159 Proceeds from disposals of available-for-sale financial assets 3,121 4,981 Dividends received on available-for-sale financial assets 23,883 20,727 Dividends received from associates 144,375 1,656 Dividends received from joint ventures 989 1,800 Net cash inflow on disposal of subsidiaries – 130,233 Net cash outflow on acquisition of subsidiaries 48 (650,727) (428,347)

NET CASH USED IN INVESTING ACTIVITIES (2,891,544) (5,743,770)




2013 2012RMB’000 RMB’000

(Restated)

FINANCING ACTIVITIES Proceeds from new borrowings 19,472,821 22,850,328 Government grants received 602,578 716,672 Contributions received from non-controlling interests – 2,404,024 Repayments of borrowings (20,464,120) (20,980,769) Interest paid (2,071,030) (1,825,234) Dividends paid to non-controlling interests (325,818) (683,664) Dividends paid (171,109) (260,340) Gross proceeds from issuance of medium-term notes 500,000 900,000 Government contributions 21,880 40,712 Received for disposal of equity interests in subsidiaries 409,280 342,798 Proceeds from short-term financing bills 2,900,000 – Repayments of short-term financing bills (400,000) (400,000) Disbursement of incremental costs directly attributable to issuance of medium-term notes – (600)

NET CASH FROM FINANCING ACTIVITIES 474,482 3,103,927

NET DECREASE IN CASH AND CASH EQUIVALENTS (1,920,133) (1,047,485)

CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR 9,235,267 10,296,226 Effect of foreign exchange rate changes (45,079) (13,474)

7,270,055 9,235,267

CASH AND CASH EQUIVALENTS AT END OF THE YEAR, represented by: Bank balances and cash 7,270,055 9,235,267



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. GENERAL INFORMATION

China National Materials Company Limited (the “Company”) was established in the People’s Republic of

China (the “PRC”) on 31 July 2007 as a joint stock company with limited liability under the Company Law. Its

immediate holding company is China National Materials Group Corporation Ltd. (“Sinoma Group”). The directors

of the Company regard the ultimate holding party as at 31 December 2013 to be Chinese State owned Assets

Supervision and Administration Commission of the State Council. The Company has been listed on the Main

Board of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) since 20 December 2007.

The address of the registered office and the principal place of business of the Company is at No. 11,

Beishuncheng Street, Xizhimennei, Xicheng District, Beijing, the PRC.

The consolidated financial statements are presented in Renminbi (“RMB”), which is the same as the functional

currency of the Company.

The Company and its subsidiaries (collectively referred to as the “Group”) are principally engaged in provision of

cement equipment and engineering services, production and sales of cement and high-tech materials. Particulars

of the Company’s principal subsidiaries are set out in Note 56(a).

2. BASIS OF PREPARATION AND PRESENTATION

2.1 Basis of preparation of the consolidated financial statements

The consolidated financial statements have been prepared on a going concern basis notwithstanding the

Group had net current liabilities of approximately RMB8,587,841,000 as at 31 December 2013.

In the opinion of the directors of the Company, the Group should be able to maintain itself as a going

concern in the next twelve months from 31 December 2013 by taking into consideration the followings:

– At 31 December 2013, the Group has undrawn borrowings facilities available for immediate use

and which will not be expiring in the next twelve months from 31 December 2013 of approximately

RMB10,074,285,000. Details of which are set out in Note 38(g).

With the basis that the undrawn banking facilities will provide a cash inflow with a view to improve its

working capital position, the directors of the Company consider that the Group will have sufficient working

capital to meet its financial obligations when they fall due for the next twelve months from 31 December

2013. Accordingly, the directors of the Company are satisfied that it is appropriate to prepare these

consolidated financial statements on a going concern basis. The consolidated financial statements do

not include any necessary adjustments relating to the carrying amount and reclassification of assets and

liabilities that might be necessary should the Group be unable to continue as a going concern.




2. BASIS OF PREPARATION AND PRESENTATION (Continued)

2.2 Adoption of merger accounting

As disclosed in Note 49, the Group acquired equity interests in certain entities from Sinoma Group

during the current year and these business combinations were accounted for as business combinations

under common control in accordance with Accounting Guideline 5 Merger Accounting for Common

Control Combinations issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”).

The consolidated financial statements incorporate the financial information of the combining entities or

businesses as if they had been combined from the date when the combining entities or businesses first

came under the control of the controlling party.

The net assets of the combining entities or business are consolidated using the existing book values from

the controlling parties’ perspective. No amount is recognised in respect of goodwill or excess of acquirer’s

interest in the net fair value of acquiree’s identifiable assets, liabilities and contingent liabilities over cost

at the time of common control combination, to the extent of the continuation of the controlling party’s

interest.

The consolidated statement of profit or loss includes the results of each of the combining entities or

businesses from the earliest date presented or since the date when the combining entities or businesses

first came under the common control, where this is a shorter period, regardless of the date of the

common control combination.

The comparative amounts in the consolidated financial statements are presented as if the entities or

business had been combined at the end of the previous reporting period or when they first came under

common control, whichever is shorter. Accordingly, comparative figures were restated. The impact on the

consolidated reserves of the Group arising from the common control combination is disclosed in Note 49.




3. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSs”)

In the current year, the Group has applied the following new and revised HKFRSs which include HKFRSs, Hong

Kong Accounting Standard (“HKAS(s)”) and Interpretations (“Int(s)”), issued by the Hong Kong Institute of

Certified Public Accountants (the “HKICPA”).

Amendments to HKFRSs Annual Improvements to HKFRSs 2009 – 2011 Cycle issued in 2012

Amendments to HKFRS 1 Government Loans

Amendments to HKFRS 7 Disclosures – Offsetting Financial Assets and Financial Liabilities

Amendments to HKFRS 10, Consolidated Financial Statements, Joint Arrangements and

HKFRS 11 and HKFRS 12 Disclosure of Interests in Other Entities: Transition Guidance

HKFRS 10 Consolidated Financial Statements

HKFRS 11 Joint Arrangements

HKFRS 12 Disclosure of Interests in Other Entities

HKFRS 13 Fair Value Measurement

HKAS 19 (as revised in 2011) Employee Benefits

HKAS 27 (as revised in 2011) Separate Financial Statements

HKAS 28 (as revised in 2011) Investments in Associates and Joint Ventures

Amendments to HKAS 1 Presentation of Items of Other Comprehensive Income

Amendments to HKAS 36 Impairment of Assets – Recoverable Amount Disclosures for

Non-Financial Assets (early adopted)

HK (IFRIC*) – Int 20 Stripping Costs in the Production Phase of a Surface Mine

* IFRIC represents the International Financial Reporting Interpretations Committee.

Except as described below, the application of the new and revised HKFRSs in the current year has had no

material impact on the Group’s financial performance and positions for the current and prior years and/or on the

disclosures set out in these consolidated financial statements.

Annual Improvements to HKFRSs 2009-2011 Cycle issued in June 2012

The Annual Improvements to HKFRSs 2009-2011 addressed a number of amendments to various HKFRSs.

The amendments to HKAS 1 clarify that an entity is required to present a third statement of financial position only

when the retrospective application, restatement or reclassification has a material effect on the information in the

third statement of financial position and that related notes are not required to accompany the third statement of

financial position.

In the current year, the Group has applied HKFRS 11 and HKAS 19 (revised 2011) for the first time, as detailed

below, which have resulted in a material effect on the information in the consolidated statement of financial

position as at 1 January 2012. In accordance with the amendments to HKAS 1, the Group has therefore presented

a third statement of financial position as at 1 January 2012 without the related notes. Other than the above

effect, the amendments in other HKFRSs under this annual improvement do not result in any impact on these





3. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSs”) (Continued)

Amendments to HKFRS 7 Disclosures – Offsetting Financial Assets and Financial Liabilities

The Group has applied the amendments to HKFRS 7 Disclosures – Offsetting Financial Assets and Financial Liabilities for the first time in the current year. The amendments to HKFRS 7 require entities to disclose

information about:

a) recognised financial instruments that are set off in accordance with HKAS 32 Financial Instruments: Presentation; and

b) recognised financial instruments that are subject to an enforceable master netting agreement or similar

agreement, irrespective of whether the financial instruments are set off in accordance with HKAS 32.

The amendments to HKFRS 7 have been applied retrospectively. The application of the amendments has had no

material impact on the amounts reported and / or on the disclosure set out in the Group’s consolidated financial

statements.

New and revised Standards on consolidation, joint arrangements, associates and disclosures

In the current year, the Group has applied for the first time the package of five standards on consolidation, joint

arrangements, associates and disclosures comprising HKFRS 10 Consolidated Financial Statements, HKFRS 11

Joint Arrangements, HKFRS 12 Disclosure of Interests in Other Entities, HKAS 27 (as revised in 2011) Separate Financial Statements and HKAS 28 (as revised in 2011) Investments in Associates and Joint Ventures, together

with the amendments to HKFRS 10, HKFRS 11 and HKFRS 12 regarding transitional guidance.

HKAS 27 (as revised in 2011) is not applicable to the Group as it deals only with separate financial statements.

The impact of the application of these standards is set out below.

Impact of the application of HKFRS 10

HKFRS 10 replaces the parts of HKAS 27 Consolidated and Separate Financial Statements that deal with

consolidated financial statements and HK(SIC) Int-12 Consolidation – Special Purpose Entities. HKFRS 10 changes

the definition of control such that an investor has control over an investee when a) it has power over the investee, b)

it is exposed, or has rights, to variable returns from its involvement with the investee and c) has the ability to

use its power to affect its returns. All three of these criteria must be met for an investor to have control over an

investee. Previously, control was defined as the power to govern the financial and operating policies of an entity

so as to obtain benefits from its activities. Additional guidance has been included in HKFRS 10 to explain when an

investor has control over an investee.

As a result of the initial application of HKFRS 10, the directors of the Company made an assessment whether the

Group has control over its investees at the date of initial application and concluded that the application of HKFRS

10 does not result in any change in control conclusion.






(Continued)


HKFRS 11 replaces HKAS 31 Interests in Joint Ventures, and the guidance contained in a related interpretation,

HK(SIC)-Int 13 Jointly Controlled Entities – Non-Monetary Contributions by Venturers, has been incorporated

in HKAS 28 (as revised in 2011). HKFRS 11 deals with how a joint arrangement of which two or more parties

have joint control should be classified and accounted for. Under HKFRS 11, there are only two types of joint

arrangements – joint operations and joint ventures. The classification of joint arrangements under HKFRS 11 is

determined based on the rights and obligations of parties to the joint arrangements by considering the structure,

the legal form of the arrangements, the contractual terms agreed by the parties to the arrangement, and, when

relevant, other facts and circumstances. A joint operation is a joint arrangement whereby the parties that have

joint control of the arrangement (i.e. joint operators) have rights to the assets, and obligations for the liabilities,

relating to the arrangement. A joint venture is a joint arrangement whereby the parties that have joint control of

the arrangement (i.e. joint venturers) have rights to the net assets of the arrangement. Previously, HKAS 31 had

three types of joint agreements – jointly controlled entities, jointly controlled operations and jointly controlled

assets. The classification of joint arrangements under HKAS 31 was primarily determined based on the legal form

of the arrangement (e.g. a joint arrangement that was established through a separate entity was accounted for as

a jointly controlled entity).

The initial and subsequent accounting of joint ventures and joint operations is different. Investments in

joint ventures are accounted for using the equity method (proportionate consolidation is no longer allowed).

Investments in joint operations are accounted for such that each joint operator recognises its assets (including its

share of any assets jointly held), its liabilities (including its share of any liabilities incurred jointly), its revenue (including

its share of revenue from the sale of the output by the joint operation) and its expenses (including its share of

any expenses incurred jointly). Each joint operator accounts for the assets and liabilities, as well as revenues and

expenses, relating to its interest in the joint operation in accordance with the applicable standards.

The directors of the Company reviewed and assessed the classification of the Group’s investments in joint

arrangements in accordance with the requirements of HKFRS 11. The directors of the Company concluded that

the Group’s investment in PPG Sinoma Jinjing Fiber Glass Co., Ltd., Zibo PPG Sinoma Jinjing Fiber Glass Co.,

Ltd., Taishan Fiberglass South Africa Co., Ltd. and Dongguan Taiguang Fiberglass Ltd. (the “Jointly Controlled

Entities of the Group”), which were classified as jointly controlled entities under HKAS 31 and were accounted

for using the proportionate consolidation method, should be classified as joint ventures under HKFRS 11 and

accounted for using the equity method.

The change in accounting of the Group’s investment in the Jointly Controlled Entities of the Group have been

applied in accordance with the relevant transitional provisions set out in HKFRS 11. The initial investment as at

1 January 2012 for the purposes of applying the equity method is measured as the aggregate of the carrying

amounts of the assets and liabilities that the Group had previously proportionately consolidated (see the tables in

pages 82 to 90 for details). Also, the directors of the Company performed an impairment assessment on the initial

investment as at 1 January 2012 and concluded that no impairment loss is required. Comparative amounts for

2012 have been restated to reflect the change in accounting for the Group’s investment in the Jointly Controlled

Entities of the Group.






(Continued)


HKFRS 12 is a new disclosure standard and is applicable to entities that have interests in subsidiaries, joint

arrangements, associates and/or unconsolidated structured entities. In general, the application of HKFRS 12 has

resulted in more extensive disclosures in the consolidated financial statements (please see notes 7, 27, 28 and 57

for details).

HKFRS 13 Fair Value Measurement

The Group has applied HKFRS 13 for the first time in the current year. HKFRS 13 establishes a single source of

guidance for fair value measurements and disclosures about fair value measurements for both financial instrument

items and non-financial instrument items for which other HKFRSs require or permit fair value measurements and

disclosures about fair value measurements, except for share-based payment transactions within the scope of

HKFRS 2 Share-based Payment, leasing transactions within the scope of HKAS 17 Leases and measurements that

have some similarities to fair value but are not fair value.

HKFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an

orderly transaction between market participants at the measurement date.

HKFRS 13 has been applied prospectively as of the beginning of the annual period and resulted in additional

disclosure as set out in notes 5, 23, 29 and 30 to the consolidated financial statements. Other than the additional

disclosures, the application of HKFRS 13 has not had any material impact on the amounts recognised in the


HKAS 19 Employee Benefits (as revised in 2011)

In the current year, the Group has applied HKAS 19 Employee Benefits (as revised in 2011) and the related

consequential amendments for the first time.

HKAS 19 (as revised in 2011) changes the accounting for defined benefit plans and termination benefits. The

most significant change relates to the accounting for changes in defined benefit obligations and plan assets. The

amendments require the recognition of changes in defined benefit obligations and in the fair value of plan assets

when they occur, and hence eliminate the ‘corridor approach’ permitted under the previous version of HKAS 19

and accelerate the recognition of past service costs. All actuarial gains and losses are recognised immediately

through other comprehensive income in order for the net pension asset or liability recognised in the consolidated

statement of financial position to reflect the full value of the plan deficit or surplus. Furthermore, the interest cost

and expected return on plan assets used in the previous version of HKAS 19 are replaced with a ‘net interest’

amount under HKAS 19 (as revised in 2011), which is calculated by applying the discount rate to the net defined

benefit liability or asset.





HKAS 19 Employee Benefits (as revised in 2011) (Continued)

Specific transitional provisions are applicable to first-time application of HKAS 19 (as revised in 2011). The

application of HKAS 19 (as revised in 2011) has had a material impact on the amounts recognised in profit or

loss and other comprehensive income in prior years. In addition, HKAS 19 (as revised in 2011) introduces certain

changes in the presentation of the defined benefit cost including more extensive disclosures, which are set out

in note 39. The Group has applied the relevant transitional provisions and restated the comparative amounts on a

retrospective basis (see the tables in pages 82 to 90 for details).

Amendments to HKAS 1 Presentation of Items of Other Comprehensive Income

The amendments to HKAS 1 introduce new terminology for the statement of comprehensive income and income

statement. Under the amendments to HKAS 1, a “statement of comprehensive income” is renamed as a “statement

of profit or loss and other comprehensive income” and an “income statement” is renamed as a statement of

profit or loss”. The amendments to HKAS 1 retain the option to present profit or loss and other comprehensive

income in either a single statement or in two separate but consecutive statements. However, the amendments to

HKAS 1 require items of other comprehensive income to be grouped into two categories: (a) items that will not

be reclassified subsequently to profit or loss; and (b) items that may be reclassified subsequently to profit or loss

when specific conditions are met. Income tax on items of other comprehensive income is required to be allocated

on the same basis – the amendments do not change the option to present items of other comprehensive income

either before tax or net of tax. The amendments have been applied retrospectively, and hence the presentation of

items of other comprehensive income has been modified to reflect the changes. Other than the above mentioned

presentation changes, the application of the amendments to HKAS 1 does not result in any impact on profit or

loss, other comprehensive income and total comprehensive income.

Amendments to HKAS 36 Impairment of Assets – Recoverable Amount Disclosures for Non-Financial Assets (early adopted)

The amendments to HKAS 36 remove the unintended disclosure requirement made by HKFRS 13 on the

recoverable amount of a cash-generating unit which is not impaired. In addition, the amendments require the

disclosure of the recoverable amounts for the assets or cash-generating units for which an impairment loss has

been recognised or reversed during the reporting period, and expand the disclosure requirements regarding the

fair value measurement for these assets or units if their recoverable amounts are based on fair value less costs

of disposal. The amendments are effective retrospectively for annual periods beginning on or after 1 January

2014 with earlier application permitted, provided HKFRS 13 is also applied. The Group has early adopted the

amendments in these financial statements. The amendments have had no impact on the financial position or

performance of the Group. Disclosures about the Group’s impaired non-financial assets are included in Note 25.





Summary of the effects of the above changes in accounting policies

The effects of changes in accounting policies described above on the results for the current and prior year by line

items are as follows:

Year ended 31/12/2012

Year ended

31/12/2013

(Originally

stated) HKFRS 11

HKAS 19

(revised

2011) (Restated)

HKAS 19

(revised

2011)

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Impact on profit or (loss):

Turnover 46,272,564 (165,793) – 46,106,771 –

Cost of sales (37,921,532) 133,473 – (37,788,059) –

Gross profit 8,351,032 (32,320) – 8,318,712 –

Interest income 169,447 (94) – 169,353 –

Other gains 1,367,117 – – 1,367,117 –

Selling and marketing expenses (1,563,025) 13,206 – (1,549,819) –

Administrative expenses (4,532,455) 20,166 5,274 (4,507,015) 16,195

Exchange gain 1,687 – – 1,687 –

Other expenses (31,434) 1,539 – (29,895) –

Finance costs (1,692,448) 8,986 – (1,683,462) –

Share of results of associates 7,365 – – 7,365 –

Share of results of joint ventures – (10,674) – (10,674) –

Profit before tax 2,077,286 809 5,274 2,083,369 16,195

Income tax expense (510,965) (809) (1,791) (513,565) (4,425)

Profit for the year 1,566,321 – 3,483 1,569,804 11,770


Owners of the Company 473,849 – 2,027 475,876 11,241

Non-controlling interests 1,092,472 – 1,456 1,093,928 529

1,566,321 – 3,483 1,569,804 11,770





Summary of the effects of the above changes in accounting policiesThe effects of changes in accounting policies described above on the results for the current and prior year by line items are as follows:

Year ended 31/12/2012Year ended31/12/2013

(Originallystated) HKFRS 11

HKAS 19(revised

2011) (Restated)

HKAS 19(revised

2011)RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Impact on total comprehensive incomeProfit for the year 1,566,321 – 3,483 1,569,804 11,770

Other comprehensive (expenses) incomeItems that will not be reclassified to profit or loss: Actuarial loss on defined benefit obligations – – (6,103) (6,103) (16,195) Income tax relating to actuarial loss on defined benefit obligations – – 1,831 1,831 4,425

– – (4,272) (4,272) (11,770)

Items that may be subsequently reclassified to profit or loss: Safety fund set aside 125,077 – – 125,077 – Utilisation of safety fund (58,973) – – (58,973) – Exchange differences arising on translation (13,474) – – (13,474) – Loss on fair value changes of available-for-sale financial assets (59,790) – – (59,790) – Income tax relating to items that may be reclassified to profit or loss 16,245 – – 16,245 –

9,085 – – 9,085 –

Other comprehensive (expenses) income for the period (net of tax) 9,085 – (4,272) 4,813 –

Total comprehensive income 1,575,406 – (789) 1,574,617 –

Total comprehensive income (expenses) attributable to: Owners of the Company 445,242 – (1,938) 443,304 – Non-controlling interests 1,130,164 – 1,149 1,131,313 –

1,575,406 – (789) 1,574,617 –





Summary of the effects of the above changes in accounting policies

The effects of changes in accounting policies described above on the assets, liabilities and equity of the Group as

at 1 January 2012 is as follows:

As at 1 January 2012

(Originally

stated) HKFRS 11

HKAS 19

(revised

2011) (Restated)

RMB’000 RMB’000 RMB’000 RMB’000

Non-current assets

Property, plant and equipment 34,223,827 (183,091) – 34,040,736

Prepaid lease payments 3,144,591 – – 3,144,591

Investment properties 184,564 – – 184,564

Intangible assets 531,809 (30,158) – 501,651

Mining rights 477,166 – – 477,166

Interests in associates 1,266,810 – – 1,266,810

Interests in joint ventures – 174,970 – 174,970

Available-for-sale financial assets 2,346,251 – – 2,346,251

Deposits paid for acquisition of subsidiaries 101,400 – – 101,400

Trade and other receivables 75,846 – – 75,846

Other non-current assets 237,789 – – 237,789

Deferred income tax assets 594,406 (1,377) (1,006) 592,023

43,184,459 (39,656) (1,006) 43,143,797

Current assets

Inventories 8,157,322 (41,280) – 8,116,042

Trade and other receivables 15,688,583 (84,741) – 15,603,842

Amounts due from customers for contract work 341,073 – – 341,073

Prepaid lease payments 100,391 – – 100,391

Derivative financial instruments 3,165 – – 3,165

Other current assets 35,180 – – 35,180

Restricted bank balances 1,919,043 – – 1,919,043

Bank balances and cash 10,200,238 (29,107) – 10,171,131

36,444,995 (155,128) – 36,289,867

Assets classified as held for sale 117,426 – – 117,426

36,562,421 (155,128) – 36,407,293





Summary of the effects of the above changes in accounting policies (Continued)The effects of changes in accounting policies described above on the assets, liabilities and equity of the Group as at 1 January 2012 is as follows:



HKAS 19(revised

2011) (Restated)RMB’000 RMB’000 RMB’000 RMB’000

Current liabilitiesTrade and other payables 22,746,524 (48,412) – 22,698,112Dividend payable 2,498 – – 2,498Amounts due to customers for contract work 131,295 – – 131,295Derivative financial instruments 138 – – 138Income tax liabilities 606,013 (1,776) – 604,237Short-term financing bills 800,000 – – 800,000Borrowings 13,610,404 (144,158) – 13,466,246Early retirement and supplemental benefit obligations 44,525 – – 44,525Provisions 41,398 – – 41,398

37,982,795 (194,346) – 37,788,449Liabilities classified as held for sale 12,038 – – 12,038

37,994,833 (194,346) – 37,800,487

Net current (liabilities) assets (1,432,412) 39,218 – (1,393,194)

Total assets less current liabilities 41,752,047 (438) (1,006) 41,750,603

Non-current liabilitiesTrade and other payables 4,120 – – 4,120Derivative financial instruments 775 – – 775Corporate bonds 2,487,829 – – 2,487,829Medium-term notes 4,352,670 – – 4,352,670Borrowings 9,641,003 – – 9,641,003Provisions 44,874 – – 44,874Deferred income 446,482 – – 446,482Early retirement and supplemental benefit obligations 301,494 – (3,681) 297,813Deferred income tax liabilities 689,741 (438) – 689,303

17,968,988 (438) (3,681) 17,964,869

NET ASSETS 23,783,059 – 2,675 23,785,734

Capital and reservesShare capital 3,571,464 – – 3,571,464Reserves 7,406,541 – 2,555 7,409,096

Equity attributable to owners of the Company 10,978,005 – 2,555 10,980,560Non-controlling interests 12,805,054 – 120 12,805,174

TOTAL EQUITY 23,783,059 – 2,675 23,785,734





Summary of the effects of the above changes in accounting policies (Continued)


at 31 December 2012 is as follows:


(Originally

stated) HKFRS 11

HKAS 19

(revised

2011) (Restated)

RMB’000 RMB’000 RMB’000 RMB’000

Non-current assets





Mining rights 483,087 – – 483,087


Interests in joint ventures – 162,496 – 162,496


Deposits paid for acquisition of subsidiaries – – – –



Deferred income tax assets 703,693 (2,835) (601) 700,257

50,856,467 (39,622) (601) 50,816,244

Current assets

Inventories 8,431,498 (53,363) – 8,378,135





Other current assets 70,287 (745) – 69,542



36,987,950 (108,086) – 36,879,864

Assets classified as held for sale – – – –

36,987,950 (108,086) – 36,879,864





Summary of the effects of the above changes in accounting policies (Continued)The effects of changes in accounting policies described above on the assets, liabilities and equity of the Group as at 31 December 2012 is as follows:



HKAS 19(revised

2011) (Restated)RMB’000 RMB’000 RMB’000 RMB’000

Current liabilitiesTrade and other payables 24,942,656 (28,214) – 24,914,442Dividend payable 7,936 – – 7,936Amounts due to customers for contract work 292,648 – – 292,648Derivative financial instruments 657 – – 657Income tax liabilities 432,634 (18) – 432,616Short-term financing bills 400,000 – – 400,000Borrowings 15,868,543 (119,096) – 15,749,447Early retirement and supplemental benefit obligations 49,114 – – 49,114Provisions 48,724 – – 48,724

42,042,912 (147,328) – 41,895,584Liabilities classified as held for sale – – – –

42,042,912 (147,328) – 41,895,584


Total assets less current liabilities 45,801,505 (380) (601) 45,800,524

Non-current liabilitiesTrade and other payables 4,645 – – 4,645Derivative financial instruments – – – –Corporate bonds 2,490,239 – – 2,490,239Medium-term notes 5,253,610 – – 5,253,610Borrowings 9,280,599 – – 9,280,599Provisions 44,788 – – 44,788Deferred income 688,903 – – 688,903Early retirement and supplemental benefit obligations 285,239 – (2,487) 282,752Deferred income tax liabilities 678,476 (380) – 678,096

18,726,499 (380) (2,487) 18,723,632

NET ASSETS 27,075,006 – 1,886 27,076,892

Capital and reservesShare capital 3,571,464 – – 3,571,464Reserves 7,688,309 – 617 7,688,926

Equity attributable to owners of the Company 11,259,773 – 617 11,260,390Non-controlling interests 15,815,233 – 1,269 15,816,502

TOTAL EQUITY 27,075,006 – 1,886 27,076,892







at 31 December 2013 is as follows:


(Originally

stated) HKFRS 11

HKAS 19

(revised

2011) Total

RMB’000 RMB’000 RMB’000 RMB’000

Non-current assets



Investment properties 177,140 (1,136) – 176,004


Mining rights 512,945 – – 512,945

Interests in associates 866,380 (2,662) – 863,718

Interests in joint ventures 47,201 87,037 – 134,238


Deposits paid for acquisition of subsidiaries – – – –



Deferred income tax assets 834,240 (1,907) (136) 832,197

54,942,133 (306,412) (136) 54,635,585

Current assets

Inventories 8,779,767 (6,487) – 8,773,280








39,991,782 (115,334) – 39,876,448

Assets classified as held for sale – – –

39,991,782 (115,334) – 39,876,448





Summary of the effects of the above changes in accounting policies (Continued)The effects of changes in accounting policies described above on the assets, liabilities and equity of the Group as at 31 December 2013 is as follows:



HKAS 19(revised

2011) TotalRMB’000 RMB’000 RMB’000 RMB’000

Current liabilitiesTrade and other payables 28,713,907 (260,769) – 28,453,138Dividend payable 8,117 – – 8,117Amounts due to customers for contract work 343,066 – – 343,066Derivative financial instruments – – – –Income tax liabilities 477,721 (51,531) – 426,190Short-term financing bills 2,900,000 – – 2,900,000Borrowings 16,257,821 – – 16,257,821Early retirement and supplemental benefit obligations 50,897 – – 50,897Provisions 25,060 – – 25,060

48,776,589 (312,300) – 48,464,289Liabilities classified as held for sale – – – –

48,776,589 (312,300) – 48,464,289


Total assets less current liabilities 46,157,326 (109,446) (136) 46,047,744

Non-current liabilitiesTrade and other payables 94,224 (90,190) – 4,034Derivative financial instruments – – – –Corporate bonds 2,492,782 – – 2,492,782Medium-term notes 5,755,339 – – 5,755,339Borrowings 7,931,426 – – 7,931,426Provisions 56,460 – – 56,460Deferred income 764,333 – – 764,333Early retirement and supplemental benefit obligations 267,948 (1,034) (543) 266,371Deferred income tax liabilities 627,064 (18,222) – 608,842

17,989,576 (109,446) (543) 17,879,587

NET ASSETS 28,167,750 – 407 28,168,157

Capital and reservesShare capital 3,571,464 – – 3,571,464Reserves 7,833,365 – 407 7,833,772

Equity attributable to owners of the Company 11,404,829 – 407 11,405,236Non-controlling interests 16,762,921 – – 16,762,921

TOTAL EQUITY 28,167,750 – 407 28,168,157






The effects of changes in accounting policies described above on the cash flows of the Group for the year ended

31 December 2012 is as follows:

HKFRS 11

HKAS 19

(revised 2011) Total

RMB’000 RMB’000 RMB’000

Net cash outflow from operating activities (20,019) – (20,019)

Net cash outflow from investing activities (22,560) – (22,560)

Net cash inflow from financing activities 25,062 – 25,062

Net cash outflow (17,517) (17,517)

The effects of changes in accounting policies described above on the earnings per share of the Group are as

follows:

Impact on basic

earnings per share

Impact on diluted

earnings per share

Year ended

31/12/2013

Year ended

31/12/2012

Year ended

31/12/2013

Year ended

31/12/2012

RMB RMB RMB RMB

Increase (decrease) in earnings per share arising

from changes in the Group’s accounting policies

in relation to application of:

– HKFRS 11 – – – –

– HKAS 19 (revised 2011) 0.003 0.001 0.003 0.001

0.003 0.001 0.003 0.001





New and revised HKFRSs issued but not yet effective

The Group has not early applied the following new and revised HKFRSs that have been issued but are not yet

effective:

Amendments to HKFRSs Annual Improvements to HKFRSs 2010-2012 Cycle2

Amendments to HKFRSs Annual Improvements to HKFRSs 2011-2013 Cycle2

HKFRS 9 Financial Instruments3

Amendments to HKFRS 7 and HKFRS 9 Mandatory Effective Date of HKFRS 9 and Transition Disclosures3

Amendments to HKFRS 10, Investment Entities1

HKFRS 12 and HKAS 27

HKFRS 14 Regulatory Deferral Accounts4

Amendments to HKAS 19 Defined Benefit Plans – Employee contributions2

Amendments to HKAS 32 Offsetting Financial Assets and Financial Liabilities1

Amendments to HKAS 39 Novation of Derivatives and Continuation of Hedge Accounting1

HK(IFRIC)-lnt 21 Levies1

1 Effective for annual periods beginning on or after 1 January 2014, with earlier application permitted.2 Effective for annual periods beginning on or after 1 July 2014, except as disclosed below. Early application is permitted.3 HKFRS 9, as amended in December 2013, amended the mandatory effective date of HKFRS 9. The mandatory effective

date is not specified in HKFRS 9 but will be determined when the outstanding phases are finalised. However, application

of HKFRS 9 is permitted.4 Effective for annual periods beginning on or after 1 January 2016.

The directors of the Company anticipate that, except as described below, the application of other new and revised

HKFRSs will have no material impact on the results and the financial position of the Group.





Annual Improvements to HKFRSs 2010-2012 Cycle

The Annual Improvements to HKFRSs 2010-2012 Cycle include a number of amendments to various HKFRSs,

which are summarised below.

The amendments to HKFRS2 (i) change the definitions of ‘vesting condition’ and ‘market condition’; and (ii) add

definitions for ‘performance condition’ and ‘service condition’ which were previously included within the definition

of ‘vesting condition’. The amendments to HKFRS 2 are effective for share-based payment transactions for which

the grant date is on or after 1 July 2014.

The amendments to HKFRS 3 clarify that contingent consideration that is classified as an asset or a liability

should be measured at fair value at each reporting date, irrespective of whether the contingent consideration is a

financial instrument within the scope of HKFRS 9 or HKAS 39 or a non-financial asset or liability. Changes in fair

value (other than measurement period adjustments) should be recognised in profit and loss. The amendments to

HKFRS 3 are effective for business combinations for which the acquisition date is on or after 1 July 2014.

The amendments to HKFRS 8 (i) require an entity to disclose the judgements made by management in applying

the aggregation criteria to operating segments, including a description of the operating segments aggregated

and the economic indicators assessed in determining whether the operating segments have ‘similar economic

characteristics’; and (ii) clarify that a reconciliation of the total of the reportable segments’ assets to the entity’s

assets should only be provided if the segment assets are regularly provided to the chief operating decision-maker.

The amendments to the basis for conclusions of HKFRS 13 clarify that the issue of HKFRS 13 and consequential

amendments to HKAS 39 and HKFRS 9 did not remove the ability to measure short-term receivables and payables

with no stated interest rate at their invoice amounts without discounting, if the effect of discounting is immaterial.





Annual Improvements to HKFRSs 2010-2012 Cycle (Continued)

The amendments to HKAS 16 and HKAS 38 remove perceived inconsistencies in the accounting for accumulated

depreciation/amortisation when an item of property, plant and equipment or an intangible asset is revalued. The

amended standards clarify that the gross carrying amount is adjusted in a manner consistent with the revaluation

of the carrying amount of the asset and that accumulated depreciation/amortisation is the difference between the

gross carrying amount and the carrying amount after taking into account accumulated impairment losses.

The amendments to HKAS 24 clarify that a management entity providing key management personnel services to

a reporting entity is a related party of the reporting entity. Consequently, the reporting entity should disclose as

related party transactions the amounts incurred for the service paid or payable to the management entity for the

provision of key management personnel services. However, disclosure of the components of such compensation

is not required.

The directors of the Company do not anticipate that the application of the amendments included in the Annual

Improvements to HKFRSs 2010-2012 Cycle will have a material effect on the Group’s consolidated financial

statements.

Annual Improvements to HKFRSs 2011-2013 Cycle

The Annual Improvements to HKFRSs 2011-2013 Cycle include a number of amendments to various HKFRSs,

which are summarised below.

The amendments to HKFRS 3 clarify that the standard does not apply to the accounting for the formation of all

types of joint arrangement in the financial statements of the joint arrangement itself.

The amendments to HKFRS 13 clarify that the scope of the portfolio exception for measuring the fair value of a

group of financial assets and financial liabilities on a net basis includes all contracts that are within the scope of,

and accounted for in accordance with, HKAS 39 or HKFRS 9, even if those contracts do not meet the definitions

of financial assets or financial liabilities within HKAS 32.

The amendments to HKAS 40 clarify that HKAS 40 and HKFRS 3 are not mutually exclusive and application of

both standards may be required. Consequently, an entity acquiring investment property must determine whether:

(a) the property meets the definition of investment property in terms of HKAS 40; and

(b) the transaction meets the definition of a business combination under HKFRS 3.

The directors of the Company do not anticipate that the application of the amendments included in the Annual

Improvements to HKFRSs 2011-2013 Cycle will have a material effect on the Group’s consolidated financial

statements.





HKFRS 9 Financial Instruments

HKFRS 9 issued in 2009 introduces new requirements for the classification and measurement of financial assets.

HKFRS 9 was amended in 2010 includes the requirements for the classification and measurement of financial

liabilities and for derecognition. In 2013, HKFRS 9 was further amended to bring into effect a substantial overhaul

of hedge accounting that will allow entities to better reflect their risk management activities in the consolidated

financial statements.

Key requirements of HKFRS 9 are described as follows:

• AllrecognisedfinancialassetsthatarewithinthescopeofHKAS39Financial Instruments: Recognition and Measurement to be subsequently measured at amortised cost or fair value. Specifically, debt investments

that are held within a business model whose objective is to collect the contractual cash flows, and that

have contractual cash flows that are solely payments of principal and interest on the principal outstanding

are generally measured at amortised cost at the end of subsequent accounting periods. All other debt

investments and equity investments are measured at their fair values at the end of subsequent reporting

periods. In addition, under HKFRS 9, entities may make an irrevocable election to present subsequent

changes in the fair value of an equity investment (that is not held for trading) in other comprehensive

income, with only dividend income generally recognised in profit or loss.

• With regard to the measurement of financial liabilities designated as at fair value through profit or loss,

HKFRS 9 requires that the amount of change in the fair value of the financial liability that is attributable

to changes in the credit risk of that liability is presented in other comprehensive income, unless the

recognition of the effects of changes in the liability’s credit risk in other comprehensive income would

create or enlarge an accounting mismatch in profit or loss. Changes in fair value of financial liabilities

attributable to changes in the financial liabilities’ credit risk are not subsequently reclassified to profit or

loss. Under HKAS 39, the entire amount of the change in the fair value of the financial liability designated

as fair value through profit or loss was presented in profit or loss.

• HKFRS 9 introduces a newmodelwhich ismore closely aligns hedge accountingwith riskmanagement

activities undertaken by companies when hedging their financial and non-financial risk exposures. As a

principle-based approach, HKFRS 9 looks at whether a risk component can be identified and measured and

does not distinguish between financial items and non-financial items. The new model also enables an entity

to use information produced internally for risk management purposes as a basis for hedge accounting.

Under HKAS 39, it is necessary to exhibit eligibility and compliance with the requirements in HKAS 39

using metrics that are designed solely for accounting purposes. The new model also includes eligibility

criteria but these are based on an economic assessment of the strength of the hedging relationship. This

can be determined using risk management data. This should reduce the costs of implementation compared

with those for HKAS 39 hedge accounting because it reduces the amount of analysis that is required to be

undertaken only for accounting purposes.





HKFRS 9 Financial Instruments (Continued)

The effective date of HKFRS 9 is not yet determined. However, earlier application is permitted.

The directors of the Company anticipate that the adoption of HKFRS 9 in the future may have significant

impact on amounts reported in respect of the Group’s financial assets and financial liabilities. However, it is not

practicable to provide a reasonable estimate of that effect until a detailed review has been completed. Changes in

the fair value of financial liabilities attributable to changes in credit risk of financial liabilities that are designated as

at fair value through profit or loss are disclosed in Note 5.2.

Amendments to HKAS 19 Defined Benefit Plans: Employee Contributions

The amendments to HKAS 19 clarify how an entity should account for contribution made by employees or third

parties to defined benefit plans, based on whether those contributions are dependent on the number of years of

service provided by the employee.

For contributions that are independent of the number of years of service, the entity may either recognize

the contributions as a reduction in the service cost in the period in which the related service is rendered, or

to attribute them to the employees’ periods of service using the projected unit credit method; whereas for

contributions that are dependent on the numbers of years of service, the entity is required to attribute them to

the employees’ periods of service.

The directors of the Company anticipate that the application of the amendments to HKAS 19 may have an impact

on the amounts reported in respect of the Group’s defined benefit plans. However, it is not practicable to provide

a reasonable estimate to that effect until a detailed review has been completed.

Amendments to HKAS 32 Offsetting Financial Assets and Financial Liabilities

The amendments to HKAS 32 clarify existing application issues relating to the offset of financial assets and

financial liabilities requirements. Specifically, the amendments clarify the meaning of “currently has a legally

enforceable right of set-off” and “simultaneous realisation and settlement”.

The amendments to HKAS 32 are effective for annual periods beginning on or after 1 January 2014 with early

application permitted and require retrospective application.

The directors of the Company do not anticipate that the application of the amendments to HKAS 32 may result in

more disclosures being made with regard to offsetting financial assets and financial liabilities in the future.




4. SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements have been prepared in accordance with HKFRSs issued by the HKICPA. In

addition, the consolidated financial statements include applicable disclosures required by the Rules Governing the

Listing of Securities on The Stock Exchange of Hong Kong Limited and by the Hong Kong Companies Ordinance.

The consolidated financial statements have been prepared on the historical cost basis except for certain financial

instruments that are measured at fair values, as explained in the accounting policies set out below. Historical cost

is generally based on the fair value of the consideration given in exchange for goods and service.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction

between market participants at the measurement date, regardless of whether that price is directly observable or

estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes

into account the characteristics of the asset or liability if market participants would take those characteristics into

account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure

purposes in these consolidated financial statements is determined on such a basis, except for share-based

payment transactions that are within the scope of HKFRS 2, leasing transactions that are within the scope of

HKAS 17, and measurements that have some similarities to fair value but are not fair value, such as net realisable

value in HKAS 2 or value in use in HKAS 36.

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on

the degree to which the inputs to the fair value measurements are observable and the significance of the inputs

to the fair value measurement in its entirety, which are described as follows:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the

entity can access at the measurement date;

• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the

asset or liability, either directly or indirectly; and

• Level3inputsareunobservableinputsfortheassetorliability.

The principal accounting policies are set out below.




4. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled

by the Company and its subsidiaries. Control is achieved when the Company;

• haspowerovertheinvestee;

• isexposed,orhasrights,tovariablereturnsfromitsinvolvementwiththeinvestee;and

• hastheabilitytouseitspowertoaffectitsreturns.

The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are

changes to one or more of the three elements of control listed above.

When the Group has less than a majority of the voting rights of an investee, it has power over the investee

when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee

unilaterally. The Group considers all relevant facts and circumstances in assessing whether or not the Group’s

voting rights in an investee are sufficient to give it power, including:

• thesizeof theGroup’sholdingofvoting rights relative to thesizeanddispersionofholdingsof theother

vote holders;

• potentialvotingrightsheldbytheGroup,othervoteholdersorotherparties;

• rightsarisingfromothercontractualarrangements;and

• any additional facts and circumstances that indicate that the Group has, or does not have, the current

ability to direct the relevant activities at the time that decisions need to be made, including voting patterns

at previous shareholders’ meetings.

Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the

Group loses control of the subsidiary.





Basis of consolidation (Continued)

Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the

consolidated statement of profit or loss from the date the Group gains control until the date when the Group

ceases to control the subsidiary.

Profit or loss and each item of other comprehensive income are attributed to the owners of the Company and

to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the

Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit

balance.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting

policies into line with the Group’s accounting policies.

All intra-group assets, liabilities, equity, income, expenses and cash flows relating to transactions between

members of the Group are eliminated in full on consolidation.

Non-controlling interests in subsidiaries are presented separately from the Group’s equity therein.

Changes in the Group’s ownership interests in existing subsidiaries

When the Group loses control of a subsidiary, a gain or loss is recognised in profit or loss and is calculated as

the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any

retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the

subsidiary and any non-controlling interests. All amounts previously recognised in other comprehensive income in

relation to that subsidiary are accounted for as if the Group had directly disposed of the related assets or liabilities

of the subsidiary (i.e. reclassified to profit or loss or transferred to another category of equity as specified/

permitted by applicable HKFRSs). The fair value of any investment retained in the former subsidiary at the date

when control is lost is regarded as the fair value on initial recognition for subsequent accounting under HKAS 39,

when applicable, the cost on initial recognition of an investment in an associate or a joint venture.

Business combinations

Business combinations involving entities under common control

When the Group and the acquiree are ultimately controlled by the same parties both before and after the

acquisition, such business combinations are referred as “common control combinations”.

The consolidated financial statements incorporate the financial statements items of the combining entities or

businesses in which the common control combination occurs as if they had been combined from the date when

the combing entities or businesses first come under the control of the controlling party.

The net assets of the combining entries or business are consolidated using the existing book values from the

controlling party’s perspective. No amount is recognised in respect of goodwill or excess of acquirer’s interest

in the net fair value of acquiree’s identifiable assets, liabilities and contingent liabilities over cost at the time of

common control combination, to the extent of the continuation of the controlling party’s interest.





Business combinations (Continued)

Business combinations involving entities under common control (Continued)

The consolidated statement of profit or loss and consolidated statement of profit or loss and other comprehensive

income includes the results of each of the combining entities or businesses from earliest date presented or since

the date when the combining entities or businesses first came under common control, where this is a shorter

period, regardless of the date of the common control combination.

The comparative amounts in the consolidated financial information are presented as if the entities or business

had been combined at the end of the previous reporting period or when they first came under common control,

whichever is shorter.

Business combinations other than common control combinations

Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a

business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values

of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and

the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are

generally recognised in profit or loss as incurred.

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair

value at the acquisition date, except that:

• deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are

recognised and measured in accordance with HKAS 12 Income Taxes and HKAS 19 Employee Benefits

respectively; and

• liabilitiesorequityinstrumentsrelatetoshare-basedpaymentarrangementsoftheacquireeorshare-based

payment arrangements of the Group entered into to replace share-based payment arrangements of the

acquiree are measured in accordance with HKFRS 2 Share-based Payment at the acquisition date (see the

accounting policy below).

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-

controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the

acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities

assumed. If, after assessment, the net of the acquisition-date amounts of the identifiable assets acquired and

liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests

in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is

recognised immediately in profit or loss as a bargain purchase gain.

Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share

of the entity’s net assets in the event of liquidation may be initially measured either at fair value or at the non-

controlling interests’ proportionate share of the recognised amounts of the acquiree’s identifiable net assets.

The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling

interests are measured at their fair value or, when applicable, on the basis specified in another HKFRS.





Goodwill

Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the

business (see the accounting policy above) less accumulated impairment losses, if any.

For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (or

groups of cash-generating units) that is expected to benefit from the synergies of the combination.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently

when there is indication that the unit may be impaired. For the goodwill arising on an acquisition in a reporting

period, the cash-generating unit to which goodwill has been allocated is tested for impairment before the end of

that reporting period. If the recoverable amount of the cash-generating unit is less than its carrying amount, the

impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then

to the other assets of the unit on a pro rata basis based on the carrying amount of each asset in the unit. Any

impairment loss for goodwill is recognised directly in profit or loss. An impairment loss recognised for goodwill is

not reversed in subsequent periods.

On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the

determination of the amount of profit or loss on disposal.

The Group’s policy for goodwill arising on the acquisition of an associate is described below.

Investments in associates and joint ventures

An associate is an entity over which the Group has significant influence. Significant influence is the power to

participate in the financial and operating policy decisions of the investee but is not control or joint control over

those policies.

A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights

to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an

arrangement, which exists only when decisions about the relevant activities require unanimous consent of the

parties sharing control.

The results and assets and liabilities of associates and joint ventures are incorporated in these consolidated

financial statements using the equity method of accounting. The financial statements of associates and joint

ventures used for equity accounting purposes are prepared using uniform accounting policies as those of the

Group for like transactions and events in similar circumstances. Under the equity method, an investment in an

associate or a joint venture is initially recognised in the consolidated statement of financial position at cost and

adjusted thereafter to recognise the Group’s share of the profit or loss and other comprehensive income of

the associate or joint venture. When the Group’s share of losses of an associate or joint venture exceeds the

Group’s interest in that associate or joint venture (which includes any long-term interests that, in substance,

form part of the Group’s net investment in the associate or joint venture), the Group discontinues recognising its

share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or

constructive obligations or made payments on behalf of the associate or joint venture.





Investments in associates and joint ventures (Continued)

An investment in an associate or a joint venture is accounted for using the equity method from the date on which

the investee becomes an associate or a joint venture. On acquisition of the investment in an associate or a joint

venture, any excess of the cost of the investment over the Group’s share of the net fair value of the identifiable

assets and liabilities of the investee is recognised as goodwill, which is included within the carrying amount of

the investment. Any excess of the Group’s share of the net fair value of the identifiable assets and liabilities over

the cost of the investment, after reassessment, is recognised immediately in profit or loss in the period in which

the investment is acquired.

The requirements of HKAS 39 are applied to determine whether it is necessary to recognise any impairment loss

with respect to the Group’s investment in an associate or a joint venture. When necessary, the entire carrying

amount of the investment (including goodwill) is tested for impairment in accordance with HKAS 36 Impairment

of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs

of disposal) with its carrying amount. Any impairment loss recognised forms part of the carrying amount of the

investment. Any reversal of that impairment loss is recognised in accordance with HKAS 36 to the extent that the

recoverable amount of the investment subsequently increases.

The Group discontinues the use of the equity method from the date when the investment ceases to be an

associate or a joint venture, or when the investment (or a portion thereof) is classified as held for sale. When the

Group retains an interest in the former associate or joint venture and the retained interest is a financial asset,

the Group measures the retained interest at fair value at that date and the fair value is regarded as its fair value

on initial recognition in accordance with HKAS 39. The difference between the carrying amount of the associate

or joint venture at the date the equity method was discontinued, and the fair value of any retained interest and

any proceeds from disposing of a part interest in the associate or joint venture is included in the determination

of the gain or loss on disposal of the associate or joint venture. In addition, the Group accounts for all amounts

previously recognised in other comprehensive income in relation to that associate or joint venture on the same

basis as would be required if that associate or joint venture had directly disposed of the related assets or

liabilities. Therefore, if a gain or loss previously recognised in other comprehensive income by that associate or

joint venture would be reclassified to profit or loss on the disposal of the related assets or liabilities, the Group

reclassifies the gain or loss from equity to profit or loss (as a reclassification adjustment) when the equity method

is discontinued.

When a group entity transacts with an associate or a joint venture of the Group (such as a sale or contribution of

assets), profits and losses resulting from the transactions with the associate or joint venture are recognised in the

Group’s consolidated financial statements only to the extent of interests in the associate or joint venture that are

not related to the Group.





Property, plant and equipment

Property, plant and equipment including buildings held for use in the production or supply of goods or services, or

for administrative purposes (other than construction in progress as described below) are stated in the consolidated

statement of financial position at cost less subsequent accumulated depreciation and accumulated impairment

losses, if any.

Depreciation is recognised so as to write off the cost of items of property, plant and equipment other than

construction in progress less their residual values over their estimated useful lives, using the straight-line method.

The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting

period, with the effect of any changes in estimate accounted for on a prospective basis.

Construction in progress includes property, plant and equipment in the course of construction for production,

supply or administrative purposes. Construction in progress is carried at cost less any recognised impairment

loss. Costs include professional fees and for qualifying assets, borrowing costs capitalised in accordance with the

Group’s accounting policy. Construction in progress is classified to the appropriate category of property, plant and

equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other

property assets, commences when the assets are ready for their intended use.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits

are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the

asset (calculated as the difference between the net disposal proceeds and the carrying amount of the assets) is

included in profit or loss in the period in which the item is derecognised.

Non-current assets held for sale

Non-current assets or disposal groups are classified as held for sale if their carrying amount will be recovered

principally through a sale transaction rather than through continuing use. This condition is regarded as met only

when the sale is highly probable and the non-current asset (or disposal group) is available for immediate sale

in its present condition. Management must be committed to the sale, which should be expected to qualify for

recognition as a completed sale within one year from the date of classification.

When the Group is committed to a sale plan involving loss of control of a subsidiary, all of the assets and

liabilities of that subsidiary are classified as held for sale when the criteria described above are met, regardless of

whether the Group will retain a non-controlling interest in its former subsidiary after the sale.

Non-current assets (or disposal groups) classified as held for sale are measured at lower of their previous carrying

amount and fair value less costs of disposal.





Investment properties

Investment properties are properties held to earn rentals and/or for capital appreciation.

Investment properties are initially measured at cost, including any directly attributable expenditure. Subsequent

to initial recognition, investment properties are stated at cost less subsequent accumulated depreciation and any

accumulated impairment losses. Depreciation is recognised so as to write off cost of investment properties over

their estimated useful lives and after taking into account of their estimated residual value, using the straight-line

method.

Intangible assets

Intangible assets acquired separately

Intangible assets acquired separately and with finite useful lives are carried at cost less accumulated amortisation

and any accumulated impairment losses. Amortisation for intangible assets with finite useful lives is recognised

on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are

reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a

prospective basis.

Research and development expenditure

Expenditure on research activities is recognised as an expense in the period in which it is incurred.

An internally-generated intangible asset arising from development activities (or from the development phase of an

internal project) is recognised if, and only if, all of the following have been demonstrated:

• thetechnicalfeasibilityofcompletingtheintangibleassetsothatitwillbeavailableforuseorsale;

• theintentiontocompletetheintangibleassetanduseorsellit;

• theabilitytouseorselltheintangibleasset;

• howtheintangibleassetwillgenerateprobablefutureeconomicbenefits;

• the availability of adequate technical, financial and other resources to complete the development and to

use or sell the intangible asset; and

• theabilitytomeasurereliablytheexpenditureattributabletotheintangibleassetduringitsdevelopment.

The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred

from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-

generated intangible asset can be recognised, development expenditure is recognised in profit or loss in the

period in which it is incurred.

Subsequent to initial recognition, internally-generated intangible asset is measured at cost less accumulated

amortisation and accumulated impairment losses (if any), on the same basis as intangible assets that are acquired

separately.





Intangible assets (Continued)

Intangible assets acquired in a business combination

Intangible assets acquired in a business combination are recognised separately from goodwill and are initially

recognised at their fair value at the acquisition date (which is regarded as their cost).

Subsequent to initial recognition, intangible assets with finite useful lives are carried at costs less accumulated

amortisation and any accumulated impairment losses. Amortisation for intangible assets with finite useful lives is

recognised on a straight-line basis over their estimated useful lives.

Derecognition of intangible assets

An items of intangible asset is derecognised upon disposal or when no future economic benefits are expected to

arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the

difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in

the period in which the asset is derecognised.

Mining rights

Mining rights represent upfront prepayments made for the mining rights and are expensed in the consolidated

income statement on a straight-line basis over the period of the mining rights or when there is impairment, the

impairment is expensed in the consolidated income statement.

Construction contracts

Where the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by

reference to the stage of completion of the contract activity at the end of the reporting period, measured based

on the proportion that contract costs incurred for work performed to date relative to the estimated total contract

costs, except where this would not be representative of the stage of completion. Variations in contract work,

claims and incentive payments are included to the extent that the amount can be measured reliably and its receipt

is considered probable.

Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to

the extent of contract costs incurred that it is probable will be recoverable. Contract costs are recognised as

expenses in the period in which they are incurred.

When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised

as an expense immediately.

Where contract costs incurred to date plus recognised profits less recognised losses exceed progress billings, the

surplus is shown as amounts due from customers for contract work. For contracts where progress billings exceed

contract costs incurred to date plus recognised profits less recognised losses, the surplus is shown as amounts

due to customers for contract work. Amounts received before the related work is performed are included in

the consolidated statement of financial position, as a liability, as advances received. Amounts billed for work

performed but not yet paid by the customer are included in the consolidated statement of financial position under

trade and other receivables.





Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and

rewards of ownership to the lessee. All other leases are classified as operating leases.

The Group as lessor

Rental income from operating leases is recognised in profit or loss on a straight-line basis over the term of the

relevant lease.

The Group as lessee

Operating lease payments are recognised as an expense on a straight-line basis over the lease term.

Leasehold land for own use

When a lease includes both land and building elements, the Group assesses the classification of each element

as a finance or an operating lease separately based on the assessment as to whether substantially all the risks

and rewards incidental to ownership of each element have been transferred to the Group, unless it is clear that

both elements are operating leases in which case the entire lease is classified as an operating lease. Specifically,

the minimum lease payments (including any lump-sum upfront payments) are allocated between the land and

the building elements in proportion to the relative fair values of the leasehold interests in the land element and

building element of the lease at the inception of the lease.

To the extent the allocation of the lease payments can be made reliably, interest in leasehold land that is

accounted for as an operating lease is presented as “prepaid lease payments” in the consolidated statement of

financial position and is amortised over the lease term on a straight-line basis. When the lease payments cannot

be allocated reliably between the land and building elements, the entire lease is generally classified as a finance

lease and accounted for as property, plant and equipment.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the weighted average

method. Net realisable value represents the estimated selling price for inventories less all estimated costs of

completion and costs necessary to make the sale.

Cash and cash equivalents

Bank balances and cash in the consolidated statement of financial position comprise cash at banks and on hand

and short-term deposits with high liquidity that are readily convertible into known amounts of cash and which are

subject to an insignificant risk of changes in value. For the purpose of the consolidated statement of cash flows,

cash and cash equivalents consist of cash and short-term deposits as defined above.





Financial instruments

Financial assets and financial liabilities are recognised in the consolidated statement of financial position when a

group entity becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly

attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets or

financial liabilities at fair value through profit or loss (“FVTPL”)) are added to or deducted from the fair value of the

financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to

the acquisition of financial assets or financial liabilities at FVTPL are recognised immediately in profit or loss.

Financial assets

Financial assets are classified into the following specified categories: financial assets at FVTPL, loans and

receivables and available-for-sale financial assets. The classification depends on the nature and purpose of the

financial assets and is determined at the time of initial recognition. All regular way purchases or sales of financial

assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases

or sales of financial assets that require delivery of assets within the time frame established by regulation or

convention in the marketplace.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a debt instruments and of

allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts

estimated future cash receipts (including all fees and points paid or received that form an integral part of the

effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt

instrument, or, where appropriate, a shorter period to the net carrying amount on initial recognition.

Interest income is recognised on an effective interest basis for debt instruments other than those financial assets

classified as at FVTPL, of which interest income is included in net gains or losses.

Financial assets at fair value through profit or loss

Financial assets are classified as at FVTPL when the financial asset is either held for trading or it is designated as

at FVTPL.

A financial asset is classified as held for trading if:

• ithasbeenacquiredprincipallyforthepurposeofsellinginthenearfuture;or

• it is a part of an identified portfolio of financial instruments that the Groupmanages together and has a

recent actual pattern of short-term profit-taking; or

• itisaderivativethatisnotdesignatedandeffectiveasahedginginstrument.

Financial assets at FVTPL are measured at fair value, with changes in fair value arising from remeasurement

recognised directly in profit or loss in the period in which they arise. The net gain or loss recognised in profit or

loss excludes any dividend or interest earned on the financial assets and is included in “other gains” or “other

expenses” line items. Fair value is determined in the manner described in note 5.3.





Financial instruments (Continued)

Financial assets (Continued)

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted

in an active market. Subsequent to initial recognition, loans and receivables (including trade and other receivables,

restricted bank balances and bank balances and cash) are carried at amortised cost using the effective interest

method, less any identified impairment losses (see accounting policy on impairment loss on financial assets

below).

Interest income is recognised by applying the effective interest rate, except for short-term receivables where the

recognition of interest would be immaterial.

Available-for-sale financial assets

Available-for-sale (“AFS”) financial assets are non-derivatives that are either designated or not classified as

financial assets at FVTPL, loans and receivables or held-to-maturity investments.

Equity and debt securities held by the Group that are classified as AFS and are traded in an active market are

measured at fair value at the end of each reporting period. Changes in the carrying amount of AFS monetary

financial assets relating to interest income calculated using the effective interest method and dividends on AFS

equity investments are recognised in profit or loss. Other changes in the carrying amount of AFS financial assets

are recognised in other comprehensive income and accumulated under the heading of investments revaluation

reserve. When the investment is disposed of or is determined to be impaired, the cumulative gain or loss

previously accumulated in the investment revaluation reserve is reclassified to profit or loss (see the accounting

policy in respect of impairment loss on financial assets below).

Dividends on AFS equity instruments are recognised in profit or loss when the Group’s right to receive the

dividends is established.

For AFS equity investments that do not have a quoted market price in an active market and whose fair value

cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted

equity investments, they are measured at cost less any identified impairment losses at the end of the reporting

period (see accounting policy in respect of impairment loss on financial assets below).







Impairment loss on financial assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each

reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result

of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash

flows of the financial assets have been affected.

For an AFS equity investment, a significant or prolonged decline in the fair value of that investment below its cost

is considered to be objective evidence of impairment.

For all other financial assets, objective evidence of impairment could include:

• significantfinancialdifficultyoftheissuerorcounterparty;or

• breachofcontract,suchasdefaultordelinquencyininterestandprincipalpayments;or

• itbecomingprobablethattheborrowerwillenterbankruptcyorfinancialre-organisation;or

• thedisappearanceofanactivemarketforthatfinancialassetbecauseoffinancialdifficulties.

For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired

individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for

a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the

number of delayed payments in the portfolio past the average credit period of 30 to 365 days, observable changes

in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortised cost, the amount of the impairment loss recognised is the difference

between the asset’s carrying amount and the present value of estimated future cash flows discounted at the

financial asset’s original effective interest rate.

For financial assets carried at cost, the amount of the impairment loss is measured as the difference between

the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current

market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent

periods.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets

with the exception of trade and other receivables, where the carrying amount is reduced through the use of an

allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

When a trade and other receivable is considered uncollectible, it is written off against the allowance account.

Subsequent recoveries of amounts previously written off are credited to profit or loss.







Impairment loss on financial assets (Continued)

When an AFS financial asset is considered to be impaired, cumulative gains or losses previously recognised in

other comprehensive income are reclassified to profit or loss in the period in which the impairment takes place.

For financial assets measured at amortised cost, if, in a subsequent period, the amount of the impairment loss

decreases and the decrease can be related objectively to an event occurring after the impairment loss was

recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the

carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost

would have been had the impairment not been recognised.

Impairment losses on AFS equity investments will not be reversed through profit or loss in subsequent periods.

Any increase in fair value subsequent to impairment loss is recognised directly in other comprehensive income

and accumulated under the heading of investment revaluation reserve.

Financial liabilities and equity instruments

Debt and equity instruments issued by a group entity are classified as either financial liabilities or as equity

instruments in accordance with the substance of the contractual arrangements and the definitions of a financial

liability and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting

all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of

direct issue costs.

Other financial liabilities

Other financial liabilities including trade and other payables, dividend payable, short-term financing bills, corporate

bonds, medium-term notes and borrowings are subsequently measured at amortised cost, using the effective

interest method.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating

interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated

future cash payments (including all fees and points paid or received that form an integral part of the effective

interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability,

or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Interest expense is recognised on an effective interest basis other than those financial liabilities classified as

FVTPL, of which the interest expenses are included in other expenses.






Financial liabilities and equity instruments (Continued)

Financial liabilities at fair value through profit or loss

Financial liabilities are classified as at FVTPL when the financial liabilities are either held for trading or those

designated at FVTPL on initial recognition.

A financial liability is classified as held for trading if:

• ithasbeenincurredprincipallyforthepurposeofrepurchasinginthenearfuture;or

• oninitialrecognition,itisapartofaportfolioofanidentifiedfinancialinstrumentsthattheGroupmanages

together and has a recent actual pattern of short-term profit-taking; or

• itisaderivativethatisnotdesignatedandeffectiveasahedginginstrument.

Financial liabilities at FVTPL are measured at fair value, with changes in fair value arising from remeasurement

recognised directly in profit or loss in the period in which they arise. The net gain or loss recognised in profit or

loss excludes any interest paid on the financial liabilities and included in “other gains” or “other expenses” line

items. Fair value is determined in the manner described in note 5.3.

Derivative financial instruments

Derivatives are initially recognised at fair value at the date when a derivative contract is entered into and are

subsequently remeasured to their fair value at the end of the reporting period. The resulting gain or loss is

recognised in profit or loss immediately, unless the derivative is designated and effective as a hedging instrument,

in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.

The fair values of derivatives are classified as non-current assets or liabilities when the remaining maturity of the

items are more than one year and current assets or liabilities when the remaining maturity are less than one year.

Financial guarantee contracts

A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the

holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the

terms of a debt instrument. A financial guarantee contract issued by the Group are not designated as at FVTPL

is recognised initially at its fair value less transaction costs that are directly attributable to issue of the financial

guarantee contract. Subsequent to initial recognition, the Group measures the financial guarantee contract at the

higher of:

(i) the amount of obligation under the contracts, as determined in accordance with HKAS 37 Provisions,

Contingent Liabilities and Contingent Assets; and

(ii) the amount initially recognised less, where appropriate, cumulative amortisation recognised in accordance

with the revenue recognition policy.






Derecognition

The Group derecognise a financial asset only when the contractual rights to receive cash flows from the asset expires, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the financial asset to another entity.

On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and is accumulated in equity recognised in profit or loss.

The Group derecognises financial liabilities when, and only when the Group’s obligation are discharged, cancelled or expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

ProvisionsProvisions are recognised when the Group has a present obligation as a result of a past event, it is probable that the Group will be required to settle that obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value of money is material).

Warranties

Provisions for the expected cost of warranty obligations under the terms of relevant sales contracts recognised at the date of sale of the relevant products, at the directors’ best estimate of the expenditure required to settle the Group’s obligation.

Foreign currenciesIn preparing the financial statements of each individual group entity, transactions in currencies other than the functional currency of that entity (foreign currencies) are recognised at the rates of exchanges prevailing on the dates of the transactions. At the end of the reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences on monetary items are recognised in profit or loss in the period in which they arise.

For the purposes of presenting the consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated into the presentation currency of the Group (i.e. RMB) at the rates of exchange prevailing at the end of each reporting period. Income and expenses items are translated at the average exchange rates for the year. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity under the heading of the foreign exchange reserve (attributable to non-controlling interests as appropriate).





Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts

receivable for goods sold and services provided in the normal course of business, net of discounts and sales

related taxes.

Deposits and installments received from purchasers prior to meeting the criteria for revenue recognition (see the

accounting policy below) are included in the consolidated statement of financial position under current liabilities.

(a) Revenue from cement equipment and engineering services

Revenue from cement equipment and engineering services is recognised under the percentage of

completion method when the contract has progressed to a stage where the stage of completion and

expected profit on the contract can be reliably determined and, is measured mainly by reference to the

contract costs incurred up to the end of the reporting period as a percentage of estimated total costs.

Variation in contract work, claims and incentive payments are included in the contract revenue to the

extent that the amount can be measured reliably and its receipt is considered probable.

If circumstances arise that may change the original estimates of revenues, costs or extent of progress

toward completion, estimates are revised. These revisions may result in increases or decreases in

estimated revenues or costs and are reflected in the consolidated income statement in the period in which

the circumstances that give rise to the revision become known by management.

(b) Other services rendered

Revenue for other services rendered, which includes, among others, technique development, design,

consultation and supervision, is recognised when such services are rendered and when it is probable that

the economic benefits associated with the transaction will flow to the entity.

(c) Sales of products

Sales of products are recognised when significant risks and rewards of ownership of the goods are

transferred to the customer and the customer has accepted the products, and all the following conditions

are satisfied:

• theGrouphastransferredtothebuyerthesignificantrisksandrewardsofownershipofthegoods;

• theGroup retainsneither continuingmanagerial involvement to thedegreeusually associatedwith

ownership nor effective control over the goods sold;

• theamountofrevenuecanbemeasuredreliably;

• itisprobablethattheeconomicbenefitsassociatedwiththetransactionwillflowtotheGroup;and

• thecostsincurredortobeincurredinrespectofthetransactioncanbemeasuredreliably.





Revenue recognition (Continued)

(d) Rental income

Rental income under operating leases of buildings is recognised on a straight-line basis over the lease

term.

(e) Interest income

Interest income from a financial asset is recognised when it is probable that the economic benefits will

flow to the Group and the amount of income can be measured reliably. Interest income from a financial

asset is accrued on a time basis, by reference to the principal outstanding and at the effective interest

rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the

expected life of the financial asset to that asset’s net carrying amount on initial recognition.

(f) Dividend income

Dividend income from investments is recognised when the shareholders’ rights to receive payment have

been established (provided that it is probable that the economic benefits will flow to the Group and the

amount of revenue can be measured reliably).

(g) Penalty income

Penalty income is recognised when the Group’s rights to receive payment have been established.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are

assets that necessarily take a substantial period of time to get ready for their intended use or sales, are added to

the cost of those assets until such time as the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

Government grants

Government grants are not recognised until there is reasonable assurance that the Group will comply with the

conditions attaching to them and that the grants will be received.

Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group

recognises as expenses the related costs for which the grants are intended to compensate. Specifically,

government grants whose primary condition is that the Group should purchase, construct or otherwise acquire

non-current assets are recognised as deferred income in the consolidated statement of financial position and

transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.

Government grants that are receivable as compensation for expenses or losses already incurred or for the

purpose of giving immediate financial support to the Group with no future related costs are recognised in profit or

loss in the period in which they become receivable.





Taxation

Income tax expense represents the sum of the income tax currently payable and deferred income tax.

The income tax currently payable is based on taxable profit for the year. Taxable profit differs from ‘profit before

tax’ as reported in the consolidated statement of profit or loss because of income or expense that are taxable or

deductible in other years and items that are never taxable or deductible. The Group’s liability for current income

tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting

period.

Deferred income tax is recognised on temporary differences between the carrying amounts of assets and

liabilities in the consolidated financial statements and the corresponding tax base used in the computation of

taxable profit. Deferred income tax liabilities are generally recognised for all taxable temporary differences.

Deferred income tax assets are generally recognised for all deductible temporary differences to the extent that

it is probable that taxable profits will be available against which those deductible temporary differences can be

utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the

initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects

neither the taxable profit nor the accounting profit.

Deferred income tax liabilities are recognised for taxable temporary differences associated with investments

in subsidiaries and associates, and interests in joint arrangements except where the Group is able to control

the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the

foreseeable future. Deferred income tax assets arising from deductible temporary differences associated with

such investments and interests are only recognised to the extent that it is probable that there will be sufficient

taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse

in the foreseeable future.

The carrying amount of deferred income tax assets is reviewed at the end of each reporting period and reduced

to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the

asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the period

in which the liability is settled or the asset is realised, based on tax rate (and tax laws) that have been enacted or

substantively enacted by the end of the reporting period.

The measurement of deferred income tax assets and liabilities reflects the tax consequences that would follow

from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying

amount of its assets and liabilities. Current and deferred income tax is recognised in profit or loss, except when

they relate to items that are recognised in other comprehensive income or directly in equity, in which case

the current and deferred income tax are also recognised in other comprehensive income or directly in equity

respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the

tax effect is included in the accounting for the business combination.





Employee benefits

(a) Retirement benefit costs and termination benefits

Payments to defined contribution retirement benefit plans are recognised as an expense when employees

have rendered service entitling them to the contributions.

For defined benefit retirement benefit plans, the cost of providing benefits is determined using the

projected unit credit method, with actuarial valuations being carried out at the end of each annual reporting

period. Remeasurement, comprising actuarial gains and losses, the effect of the changes to the asset

ceiling (if applicable), is reflected immediately in the statement of financial position with a charge or credit

recognised in other comprehensive income in the period in which they occur. Remeasurement recognised

in other comprehensive income is reflected immediately in retained earnings and will not be reclassified

to profit or loss. Past service cost is recognised in profit or loss in the period of a plan amendment. Net

interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit

liability or asset. Defined benefit costs are categorised as follows:

• service cost (including current service cost, past service cost, as well as gains and losses on

curtailments and settlements);

• netinterestexpenseorincome;and

• remeasurement.

The Group presents the first two components of defined benefit costs in profit or loss in the line item

employee benefits expense. Curtailment gains and losses are accounted for as past service costs.

The retirement benefit obligation recognised in the consolidated statement of financial position represents

the actual deficit or surplus in the Group’s defined benefit plans. Any surplus resulting from this calculation

is limited to the present value of any economic benefits available in the form of refunds from the plans or

reductions in future contributions to the plans.

A liability for a termination benefit is recognised at the earlier of when the Group entity can no longer

withdraw the offer of the termination benefit and when it recognises any related restructuring costs.

After 31 December 2006, the Company will not allow early retirement, nor provide such termination

benefits to employees who are terminated after then.

(b) Housing funds

All full-time employees of the Group in the PRC are entitled to participate in various housing funds. The

Group contributes on a monthly basis to these funds based on certain percentages of the salaries of the

employees. The Group’s liability in respect of these funds is limited to the contributions payable in each

period.





Employee benefits (Continued)

(c) Bonus entitlements

The expected cost of bonus payments is recognised as a liability when the Group has a present contractual

or constructive obligation as a result of services rendered by employees and a reliable estimate of the

obligation can be made. Liabilities for bonus are expected to be settled within twelve months and are

measured at the amounts expected to be paid when they are settled.

Cash-settled share-based payment transactions

For cash-settled share-based payments, the Group measures the services acquired and the liability incurred at

the fair value of the liability. At the end of the reporting period, the liability is remeasured at its fair value until the

liability is settled, with any changes in fair value recognised in profit or loss.

Impairment losses on tangible assets, mining rights and intangible assets other than goodwill (see the accounting policy in respect of goodwill above)

At the end of the reporting period, the Group reviews the carrying amounts of its tangible assets, mining rights

and intangible assets with finite useful lives to determine whether there is any indication that those assets have

suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in

order to determine the extent of the impairment loss, if any. When it is not possible to estimate the recoverable

amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which

the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are

also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-

generating units for which a reasonable and consistent allocation basis can be identified.

Recoverable amount is the higher of fair values less costs to sell and value in use. In assessing value in use,

the estimated future cash flows are discounted to their presented value using a pre-tax discount rate that

reflects current market assessments of the time value of money and the risks specific to the asset for which the

estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its carrying amount,

the carrying amount of the asset (or a cash-generating unit) is reduced to its recoverable amount. An impairment

loss is recognised as an expense immediately in profit or loss.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is

increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does

not exceed the carrying amount that would have been determined had no impairment loss been recognised for

the asset (or a cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income

immediately in profit or loss.




5. FINANCIAL INSTRUMENTS

5.1 Categories of financial instruments

31 December

2013

31 December

2012


Financial assets

Derivative financial instruments 21,169 4,708

Loans and receivables (including cash

and cash equivalents) 23,406,928 23,009,134

Available-for-sale financial assets 2,022,555 2,288,320

25,450,652 25,302,162

Financial liabilities

Derivative financial instruments – 657

Amortised cost 52,849,217 48,837,555

52,849,217 48,838,212

5.2 Financial risk management objectives and policies

The Group’s major financial instruments include available-for-sale financial assets, derivative financial

instruments, trade and other receivables, restricted bank balances, bank balances and cash, trade and

other payables, short-term financing bills, borrowings, corporate bonds, medium-term notes and dividend

payable. Details of the financial instruments are disclosed in respective notes. The risks associated with

these financial instruments include market risk (including foreign exchange risk, interest rate risk and other

price risk), credit risk and liquidity risk. The policies on how to mitigate these risks are set out below. The

management manages and monitors these exposures to ensure appropriate measures are implemented on

a timely and effective manner.

There has been no change to the types of the Group’s exposure in respect of financial instruments or the

manner in which it manages and measures the risks.




5. FINANCIAL INSTRUMENTS (Continued)

5.2 Financial risk management objectives and policies (Continued)

(a) Foreign exchange risk

The Group’s functional currency is RMB with the majority of transactions settled in RMB. However,

foreign currencies are used to collect the Group’s revenue from overseas operations and settle

the Group’s purchases of machinery and equipment from overseas suppliers and certain expenses.

RMB is not freely convertible into other foreign currencies and conversion of RMB into foreign

currencies is subject to rules and regulations of foreign exchange control promulgated by the PRC

government.

The Group’s exposure to foreign exchange risk relates principally to its trade and other receivables

(except for prepayments to suppliers and subcontractors), restricted bank balances, bank balances

and cash, trade and other payables (except for prepayments from customers) and borrowings as at

31 December 2013 denominated in foreign currencies, mainly United States Dollars (“US$”), Euro

(“EUR”), Nigerian Naira (“NGN”), Vietnamese Dong (“VND”), Egyptian Pound (“EGP”), CFA Franc

BCEAO (“XOF”), Malaysian Ringgit (“MYR”), Emirati Dirham (“AED”), Iraqi Dinar (“IQD”), Albanian

Lek (“ALL”), Saudi Arabian Riyal (“SAR”), Azerbaijani Manat (“AZN”) and South African Rand (“ZAR”).

Analysis of these assets and liabilities by currency are disclosed in Notes 32, 34, 35, 36 and 38.

To mitigate the impact of exchange rate fluctuations, the Group continually assesses and monitors

the exposure to foreign exchange risk. During the year, management of the Group has entered

into certain foreign currency forward contracts, however they do not qualify for hedge accounting,

therefore, they are deemed as financial assets or financial liabilities held for trading. The particulars

of the outstanding foreign currency forward contracts as at the end of the reporting period are

disclosed in Note 30.






(a) Foreign exchange risk (Continued)

The carrying amounts of the Group’s monetary assets and liabilities that are denominated in

currencies other than the functional currencies of relevant group entities at the end of reporting

period are as follows:

Assets Liabilities

31 December

2013

31 December

2012

31 December

2013

31 December

2012

RMB’000 RMB’000 RMB’000 RMB’000

US$ 1,614,497 1,285,948 (1,950,257) (1,582,986)

EUR 344,017 782,085 (531,516) (289,516)

ZAR 16,353 47,481 – –

SAR 254,076 198,553 – –

XOF 37,872 30,922 – –

MYR 13,855 13,348 – –

AED 25,679 – – –

IQD 122,920 133,320 – –

ALL 76,618 64,390 – –

AZN 62,836 74,592 – –

Others 186,883 131,453 (5,033) (2,849)

2,755,606 2,762,092 (2,486,806) (1,875,351)

The Group’s exposure to foreign exchange risk mainly relates to US$, EUR, ZAR, SAR, XOF, MYR,

AED, IQD, ALL and AZN. The following sensitivity rates used when reporting foreign exchange

risk internally to key management personnel and represents management’s assessment of the

reasonably possible change in foreign exchange rates.

Sensitivity analysis

As at 31 December 2013, if RMB had strengthened by 1% (2012: 1%) against US$ with all other

variables held constant, which was considered reasonably possible at that date by management,

the post-tax profit for the year would have been approximately RMB2,854,000 higher (2012:

RMB2,525,000 higher), mainly as a result of foreign exchange gains (2012: gains) on translation

of US$-denominated trade and other receivables (except for prepayments to suppliers and

subcontractors), restricted bank balances, bank balances and cash, trade and other payables (except

for prepayments from customers) and borrowings. The adverse movement in US$ would be an

equal and opposite impact on the post-tax profit for the year.







Sensitivity analysis (Continued)

As at 31 December 2013, if RMB had strengthened by 2% (2012: 2%) against EUR with all other


the post-tax profit for the year would have been approximately RMB3,187,000 higher (2012:

RMB8,374,000 lower), mainly as a result of foreign exchange gains (2012: losses) on translation

of EUR-denominated trade and other receivables (except for prepayments to suppliers and

subcontractors), restricted bank balances, bank balances and cash and trade and other payables

(except for prepayments from customers). The adverse movement in EUR would be an equal and

opposite impact on the post-tax profit for the year.

As at 31 December 2013, if RMB had strengthened by 5% (2012: 5%) against ZAR with all other


the post-tax profit for the year would have been approximately RMB695,000 lower (2012:

RMB2,018,000 lower), mainly as a result of foreign exchange losses (2012: losses) on translation of

ZAR-denominated bank balances and cash. The adverse movement in ZAR would be an equal and


As at 31 December 2013, if RMB had strengthened by 1% (2012: 1%) against SAR with all other


the post-tax profit for the year would have been approximately RMB2,160,000 lower (2012:

RMB1,688,000 lower), mainly as a result of foreign exchange losses (2012: losses) on translation

of SAR-denominated trade and other receivables (except for prepayments to suppliers and

subcontractors) and bank balances and cash. The adverse movement in SAR would be an equal and

opposite impact on post-tax profit for the year.

As at 31 December 2013, if RMB had strengthened by 1% (2012: 1%) against XOF with all other



RMB263,000 lower), mainly as a result of foreign exchange losses (2012: losses) on translation of

XOF-denominated bank balances and cash. The adverse movement in XOF would be an equal and


As at 31 December 2013, if RMB had strengthened by 1% (2012: 1%) against MYR with all other



RMB113,000 lower), mainly as a result of foreign exchange losses (2012: losses) on translation of

MYR-denominated bank balances and cash. The adverse movement in MYR would be an equal and








Sensitivity analysis (Continued)

As at 31 December 2013, if RMB had strengthened by 1% (2012: Nil) against AED with all other

variables held constant, which was considered reasonably possible at that date by management, the

post-tax profit for the year would have been approximately RMB218,000 lower (2012:Nil), mainly as

a result of foreign exchange losses (2012: losses) on translation of AED-denominated bank balances

and cash. The adverse movement in AED would be an equal and opposite impact on the post-tax

profit for the year.

As at 31 December 2013, if RMB had strengthened by 1% (2012: 1%) against IQD with all other


the post-tax profit for the year would have been approximately RMB1,045,000 lower (2012:

RMB1,133,000 lower), mainly as a result of foreign exchange losses (2012: losses) on translation

of IQD-denominated trade and other receivables (except for prepayments to suppliers and

subcontractors) and bank balances and cash. The adverse movement in IQD would be equal and


As at 31 December 2013, if RMB had strengthened by 1% (2012: 1%) against ALL with all other


the post-tax profit for the year would have been approximately RMB651,000 lower (2012:547,000

lower), mainly as a result of foreign exchange losses (2012: losses) on translation of ALL-

denominated trade and other receivable (except for prepayments to suppliers and subcontractors)

and bank balances and cash. The adverse movement in ALL would be an equal and opposite impact

on the post-tax profit for the year.

As at 31 December 2013, if RMB had strengthened by 1% (2012: 1%) against AZN with all other


the post-tax profit for the year would have been approximately RMB534,000 lower (2012:634,000

lower), mainly as a result of foreign exchange losses (2012: losses) on translation of AZN-

denominated trade and other receivable (except for prepayments to suppliers and subcontractors)

and bank balances and cash. The adverse movement in AZN would be an equal and opposite

impact on the post-tax profit for the year.






(b) Cash flow and fair value interest rate risk

The Group’s exposure to changes in interest rates is mainly attributable to its loan receivables,

restricted bank balances, bank balances, short-term financing bills, borrowings, corporate bonds

and medium-term notes. Bank balances and borrowings at variable rates expose the Group to

cash flow interest-rate risk. As at 31 December 2013, approximately RMB6,561,122,000 (2012:

approximately RMB6,745,630,000) and RMB14,588,535,000 (2012: approximately RMB15,269,584,

000) of the Group’s bank balances and borrowings were at variable rates, respectively. Bank

balances and borrowings at fixed rates expose the Group to fair value interest-rate risk. As at 31

December 2013, approximately RMB25,400,000 (2012: RMB21,500,000), RMB1,379,963,000 (2012:

RMB1,974,089,000), RMB705,338,000 (2012: restated RMB2,432,631,000), RMB2,900,000,000

(2012: RMB400,000,000), RMB9,600,712,000 (2012: RMB9,760,462,000), RMB2,492,782,000

(2012: RMB2,490,239,000) and RMB5,755,339,000 (2012: RMB5,253,610,000) of the Group’s

loan receivables, restricted bank balances, bank balances, short-term financing bills, borrowings,

corporate bonds and medium-term notes were at fixed rates, respectively. The interest rates

and maturities of the Group’s restricted bank balances, bank balances, short-term financing bills,

borrowings, corporate bonds and medium-term notes are disclosed in Notes 32, 34, 35, 37, 38, 42

and 43.

To mitigate the impact of interest rate fluctuations, the Group continually assesses and monitors

the exposure to interest rate risk.

As at 31 December 2013, if the interest rate on variable-rate borrowings, and bank balances had

been 100 basis points (2012: 100 basis points) higher with all other variables held constant, which

was considered reasonably possible at that date by management, profit for the year would has

been RMB53,232,000 lower (2012: restated RMB63,574,000 lower), mainly as a result of higher

interest expenses on bank borrowings and higher interest income on bank balances.

(c) Other price risk

The Group is exposed to equity price risk through its investments in listed equity securities. The

management manages this exposure by maintaining a portfolio of investments with different risks.

Sensitivity analysis

The sensitivity analyses below have been determined based on the exposure to equity securities

price risks at the reporting date.

If the price of the respective equity securities had been 10% (2012: 10%) higher/lower, the

investment revaluation reserve would increase/decrease by approximately RMB139,145,000 (2012:

restated approximately RMB161,701,000) for the Group as a result of the changes in fair value of

available-for-sale financial assets.






(d) Credit risk

The carrying amounts of trade and other receivables (except for prepayments to suppliers and

subcontractors), restricted bank balances and bank balances represent the Group’s maximum

exposure to credit risk in relation to financial assets. The Group has policies in place to ensure that

services are rendered and products are sold to customers with appropriate credit history and the

Group performs periodic assessment on the credit quality of the customers, taking into account

its financial position, past experience and other factors. Normally the Group does not hold any

collaterals as security. The directors of the Company consider the Group does not have a significant

concentration of credit risk. Contributions from the largest and five largest customers accounted for

approximately 2% (2012: 2%) and 5% (2012: 6%) of the Group’s total trade receivables as at 31

December 2013.

In respect of the prepayments to suppliers and subcontractors, the directors of the Company

closely monitors the subsequent execution of the contractual obligation performed by the suppliers

and subcontractors and review its recoverability to ensure that adequate impairment losses are

recognised for those suppliers and subcontractors failure to discharge their obligation to execute

the contracts.

The credit risk on bank balances is limited because the restricted bank balances and bank balances

are maintained with state-owned banks or other creditworthy financial institutions in the PRC and

overseas.

The credit risk on financial guarantee given by the Group is limited as the guarantees are either the

stated-owned enterprises or enterprises with strong financial position as at 31 December 2012.

The maximum exposure of financial guarantee is arising from the amount of contingent liabilities in

relation to the financial guarantees provided by the Group as disclosed in Note 51.

The counterparties of the Group are mainly in the PRC. However, the credit risk on geographical

locations is limited as the counterparties are spread over among different cities and provinces in

the PRC as at 31 December 2013 and 2012.






(e) Liquidity risk

Prudent liquidity risk management includes maintaining sufficient cash and the availability of funding

through an adequate amount of committed credit facilities. Due to the dynamic nature of the

underlying business, the Group aims to maintain a reasonable level of cash and cash equivalents

and flexibility in funding by keeping committed credit lines available.

Due to the capital intensive nature of the Group’s business, the Group ensures that it maintains

sufficient cash and credit lines to meet its liquidity requirements. The Group finances its working

capital requirements through a combination of funds generated from operations, short-term

financing bills, borrowings, corporate bonds and medium-term notes.

The maturity analysis of short-term financing bills, borrowings, corporate bonds and medium-term

notes that shows the remaining contractual maturities is disclosed in Notes 37, 38, 42 and 43

respectively. Generally there is no specific credit period granted by the suppliers but the related

trade payables are normally expected to be settled within one year after receipt of goods or

services.

The Group is exposed to liquidity risk as at 31 December 2013 as the Group had net current

liabilities of approximately RMB8,587,841,000. The directors of the Company are of the opinion

that the Group will have sufficient working capital to meet its financial obligations and the details of

which are set out in Note 2.

The following table details the Group’s remaining contractual maturity for its non-derivative

financial liabilities. The table has been drawn up based on the undiscounted cash flows of financial

liabilities based on the earliest date on which the Group can be required to pay. The table includes

both interest and principal cash flows. To the extent that interest flows are floating rate, the

undiscounted amount is derived from interest rate curve at the end of the reporting period.






(e) Liquidity risk (Continued)

In addition, the following table details the Group’s liquidity analysis for its derivative financial

instruments. The table has been drawn up based on the undiscounted contractual net cash inflows

and outflows on derivative instruments that settle on a net basis, and the undiscounted gross

inflows and outflows on those derivatives that require gross settlement. When the amount payable

is not fixed, the amount disclosed has been determined by reference to the projected interest rates

as illustrated by the yield curves existing at the end of the reporting period. The liquidity analysis

for the Group’s derivative financial instruments are prepared based on the contractual maturities as

the management consider that the contractual maturities are essential for an understanding of the

timing of the cash flows of derivatives.

Less than

1 year

Between

1 and

2 years

Between

2 and

5 years

Over

5 years

Total

undiscounted

cash flows

Carrying

amounts

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


Non-derivative financial liabilitiesTrade and other payables 17,499,698 – 4,034 – 17,503,732 17,503,732

Dividend payable 8,117 – – – 8,117 8,117

Short-term financing bills 3,112,860 – – – 3,112,860 2,900,000

Borrowings 17,789,924 4,341,115 5,419,089 717,186 28,267,314 24,189,247

Corporate bonds 135,000 135,000 2,578,041 – 2,848,041 2,492,782

Medium-term notes 333,636 1,971,875 4,855,501 – 7,161,012 5,755,339

38,879,235 6,447,990 12,856,665 717,186 58,901,076 52,849,217

Derivative financial instruments – gross settlementForeign currency forward contracts

– inflow (2,210,089) – – – (2,210,089) (2,210,089)

– outflow 2,188,920 – – – 2,188,920 2,188,920

(21,169) – – – (21,169) (21,169)






(e) Liquidity risk (Continued)

Less than

1 year

Between

1 and

2 years

Between

2 and

5 years

Over

5 years

Total

undiscounted

cash flows

Carrying

amounts


As at 31 December 2012 (restated)

Non-derivative financial liabilitiesTrade and other payables 15,651,079 – 4,645 – 15,655,724 15,655,724

Dividend payable 7,936 – – – 7,936 7,936

Short-term financing bills 417,160 – – – 417,160 400,000

Borrowings 17,453,901 5,144,245 6,098,524 821,146 29,517,816 25,030,046

Corporate bonds 135,000 135,000 2,713,041 – 2,983,041 2,490,239

Medium-term notes 308,436 308,436 5,714,097 – 6,330,969 5,253,610

Financial guarantee contracts 30,000 – – – 30,000 –

34,003,512 5,587,681 14,530,307 821,146 54,942,646 48,837,555

Derivative financial instruments – gross settlementForeign currency forward contracts

– inflow (355,926) – – – (355,926) (355,926)

– outflow 351,875 – – – 351,875 351,875

(4,051) – – – (4,051) (4,051)

The amounts included above for financial guarantee contracts are the maximum amounts the Group

could be required to settle under the agreement for the full guaranteed amount if that amount is

claimed by the counterparty to the guarantee (Note 51). Based on expectations at the end of the

reporting period, the Group considers that it is more likely than not that no amount will be payable

under the arrangement. However, this estimate is subject to change depending on the probability of

the counterparty claiming under the guarantee which is a function of the likelihood that the financial

receivables held by the counterparty which are guaranteed suffer credit losses.

The amounts included above for variable interest rate instruments for non-derivative financial

liabilities is subject to change if changes in variable interest rates differ to those estimates of

interest rates determined at the end of the reporting period.





5.3 Fair value measurements of financial instruments

(i) Fair value of the Group’s financial assets and financial liabilities that are measured at

fair value on a recurring basis

Some of the Group’s financial assets and financial liabilities are measured at fair value at the end

of each reporting period. The following table gives information about how the fair values of these

financial assets and financial liabilities are determined (in particular, the valuation technique(s) and

inputs used).

Fair value as at

Financial assets/financial liabilities

31 December

2013

31 December

2012 Fair value

hierarchy

Valuation techniques

and key inputsRMB’000 RMB’000

Financial assets at FVTPLForeign currency forward contracts classified

as derivative financial instruments in the

consolidated statement of financial position

Assets:

21,169

Liabilities:

Nil

Assets:

4,708

Liabilities:

657

Level 2 Discounted cash flow. Future cash flows

are estimated based on forward exchange

rates (from observable forward exchange

rates at the end of the reporting period)

and contracted forward rates, discounted

at a rate that reflects the credit risk

of various counterparties

Financial liabilities at fair valueLiabilities for cash-settled share-based payments 113 984 Level 2 Black-Scholes pricing model

The key inputs are expected volatility (50%),

risk-free rate (3.30% to 4.46%) and

dividend yield (1%)

Listed available-for-sale financial assets 1,829,356 2,131,214 Level 1 Quoted bid prices in an active market





5.3 Fair value measurements of financial instruments (Continued)

(ii) Fair value of financial assets and financial liabilities that are not measured at fair value on a recurring basis (but fair value disclosures are required)

Carryingamounts at

31 December2013

Fair value at31 December

2013

Carryingamounts at

31 December2012

Fair value at31 December

2012RMB’000 RMB’000 RMB’000 RMB’000

Investment property 176,004 732,907 173,315 639,933

The directors of the Company consider that the carrying amounts of other financial assets and financial liabilities recognised in the consolidated financial statements approximate their fair values due to their immediate or short-term maturities.

(iii) Fair value hierarchyLevel 1 Level 2 Level 3 Total

RMB’000 RMB’000 RMB’000 RMB’000

As at 31 December 2013Financial assets at FVTPLDerivative financial assets – 21,169 – 21,169

Available-for-sales financial assetsListed equity securities 1,829,356 – – 1,829,356

1,829,356 21,169 – 1,850,525

Financial liabilities at FVTPLDerivative financial liabilities – – – –

Level 1 Level 2 Level 3 TotalRMB’000 RMB’000 RMB’000 RMB’000

As at 31 December 2012Financial assets at FVTPLDerivative financial assets – 4,708 – 4,708

Available-for-sales financial assetsListed equity securities 2,131,214 – – 2,131,214

2,131,214 4,708 – 2,135,922

Financial liabilities at FVTPLDerivative financial liabilities – (657) – (657)

The fair values of the financial assets and financial liabilities included in the level 2 categories above have been determined in accordance with generally accepted pricing models based on a discounted cash flow analysis, with the most significant inputs being the discount rate that reflects the credit risk of counterparties.

There were no transfers between Level 1 and 2 during the year ended 31 December 2013 and 2012.




6. CAPITAL RISK MANAGEMENT

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern

in order to provide returns for shareholders and benefits for other shareholders and to maintain an optimal capital

structure to reduce the cost of capital. The Group’s overall strategy remains unchanged from prior year.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to

shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debts.

The Group monitors its capital on the basis of the net debt ratio which is calculated as net debt divided by total

equity. Net debt is calculated as the total amount of interest-bearing debts (including current and non-current

borrowings, short-term financing bills, corporate bonds and medium-term notes as shown in the consolidated

statement of financial position) less restricted bank balances and bank balances and cash. Based on the opinion of

the Company’s directors, the Group will focus on reducing short term debts and control the capital investment in

lower level in order to maintain the net debt ratio at a reasonable level in coming future.

The net debt ratios of the Group are as follows:

31 December

2013

31 December

2012


Short-term financing bills (Note 37) 2,900,000 400,000

Total borrowings (Note 38) 24,189,247 25,030,046

Corporate bonds (Note 42) 2,492,782 2,490,239

Medium-term notes (Note 43) 5,755,339 5,253,610

Less: Restricted bank balances (Note 34) (1,379,963) (1,974,089)

Bank balances and cash (Note 35) (7,270,055) (9,235,267)

Net debt 26,687,350 21,964,539

Total equity 28,168,157 27,297,216

Net debt ratio 94.74% 80.46%

The increase in the net debt ratio during the year ended 31 December 2013 resulted primarily from more

borrowings has been obtained by the Group to provide funds for operation. The Group did not breach any loan

covenants at the end of the reporting period.




7. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’s accounting policies, which are described in Note 4, the directors of the Company

are required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities

that are not readily apparent from other sources. The estimates and associated assumptions are based on

historical experience and other factors that are considered to be relevant. Actual results may differ from these

estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates

are recognised in the period in which the estimate is revised if the revision affects only that period, or in the

period of the revision and future periods if the revision affects both current and future periods.

Critical judgments in applying the entity’s accounting policies

The following are the critical judgments, apart from those involving estimations (see below), that the directors

of the Company have made in the process of applying the Group’s accounting policies and that have the most

significant effect on the amounts recognised in the consolidated financial statements:

(a) Going concern basis

Although the Group had net current liabilities at the end of the reporting period, the Group manages its

liquidity risk by monitoring its current and expected liquidity requirements regularly and ensuring sufficient

liquid cash to meet the Group’s liquidity requirements in the short and long term. Details of liquidity risk

are disclosed in Note 5.2.

(b) De facto control over subsidiaries

The Group’s management exercises its critical judgment when determining whether the Group has de

facto control over an entity by evaluating, among other things: (i) the amount of additional interests in the

subsidiary required to be acquired by the Group so as to obtain the legal rights to govern financial and

operating policies; (ii) the ability to demonstrate effective control during the shareholders’ meetings and

board meetings; (iii) the extent of reliance of the subsidiary on the financial and operational support from

the Group; and (iv) the extent of involvement of directors of the subsidiary nominated by the Group in its

operational and financial policy setting and decision making. Please refer to Note 56 (a) (i) for details.

(c) Significant influence over associates

The Group’s management exercises its critical judgment when determining whether the Group has

significant influence over an entity by one or more of the following ways: (a) representation on the board

of directors or equivalent governing body of the investee; (b) participation in policy-making processes,

including participation in decisions about dividends or other distribution; (c) material transactions between

the investor and the investee; (d) interchange of managerial personnel; or (e) provision of essential

technical information.




7. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

Critical judgments in applying the entity’s accounting policies (Continued)

(d) Significant influence over joint ventures

The Group’s management exercises its critical judgment when determining whether the joint arrangement

Group is under joint venture or joint operation. The Group determines the classification of joint

arrangements based on the rights and obligations to the joint arrangements. A joint operation is a joint

arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and

obligations for the liabilities, relating to the arrangement. A joint venture is a joint arrangement whereby

the parties that have joint control of the arrangement have rights to the net assets of the arrangement.

The joint arrangements of the Group are joint ventures.

(e) Current and deferred income tax

The Group is subject to income taxes in several jurisdictions. Judgment is required in determining the

provision for income taxes in each of these jurisdictions. There are many transactions and calculations

for which the ultimate tax determination is uncertain during the ordinary course of business. The Group

recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will

be due. Where the final tax outcome of these matters is different from the amounts that were initially

recorded, such differences will impact the income tax and deferred tax provisions in the periods in which

such determination are made.

Deferred tax assets relating to certain temporary differences and tax losses are recognised as management

considers it is probable that future taxable profit will be available against which the temporary differences

or tax losses can be utilised. Where the expectation is different from the original estimate, such

differences will impact the recognition of deferred tax assets and taxation in the periods in which such

estimates are changed.

(f) Ownership of the buildings

Despite the Group has paid the full purchase consideration as detailed in Notes 21, formal titles of certain

of the Group’s rights to the use of the buildings were not yet granted from the relevant government

authorities. In the opinion of the directors of the Company, the absence of formal title to these buildings

does not impair the value of the relevant assets to the Group.

Key sources of estimation uncertainty

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty

at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying

amounts of assets and liabilities within the next financial year.

(a) Useful lives and residual value of property, plant and equipment

The Group’s management determines the residual value, useful lives and related depreciation charges for

its property, plant and equipment. These estimates are based on the historical experience of the actual

residual value and useful lives of property, plant and equipment of similar nature and functions. They could

change significantly as a result of technical innovations and competitor actions in response to severe

industry cycles. Management will increase the depreciation charge where residual value or useful lives are

less than previously estimated.




7. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (Continued)

Key sources of estimation uncertainty (Continued)

(b) Impairment of property, plant and equipment

The Group assesses annually whether property, plant and equipment have any indication of impairment, in

accordance with relevant accounting policies. The recoverable amounts of property, plant and equipment

have been determined based on value in use calculations. These calculations and valuations require the use

of judgment and estimates on future operating cash flows and discount rates adopted. As at 31 December

2013, the carrying amount of property, plant and equipment is approximately RMB45,210,186,000 (net

of accumulated impairment approximately RMB391,413,000) (31 December 2012: Carrying amount of

approximately RMB41,286,046,000, net of accumulated impairment of approximately RMB218,533,000).

(c) Impairment loss recognised in respect of available-for-sale financial assets

The Group follows the guidance of HKAS 39 Financial Instruments – Recognition and Measurement in

determining when an available-for-sale financial asset is impaired. This determination requires significant

judgment and estimation. In making this judgment and estimation, the Group evaluates, among other

factors, the duration and extent to which the fair value of an investment is less than its cost; and the

financial health of and near-term business outlook for the investee, including factors such as industry and

sector performance, changes in technology and operational and financing cash flow. As at 31 December

2013, the carrying amount of available-for-sale financial assets is approximately RMB2,022,555,000 (net of

impairment loss of approximately RMB109,206,000) (31 December 2012: carrying amount of approximately

RMB2,288,320,000, net of impairment loss of approximately RMB106,260,000).

(d) Allowance for inventories

During the year, the Group reversed the allowance of inventories of approximately RMB12,205,000 (2012:

RMB10,534,000). The Group makes allowance for inventories based on assessment of the net realisable

value of inventories. Allowance is applied to inventories where events or changes in circumstances indicate

that the net realisable value is lower than the cost of inventories. The identification of obsolete inventories

required the use of judgment and estimates on the conditions and usefulness of the inventories. As

at 31 December 2013, the carrying amount of inventories is approximately RMB8,773,280,000 (net

of accumulated allowance of inventories approximately of RMB306,642,000) (31 December 2012:

carrying amount of approximately RMB8,393,346,000, net of allowance of inventories of approximately

RMB170,850,000).

(e) Impairment loss recognised in respect of trade and other receivables

The Group’s management determines the provision for impairment of trade and other receivables with

the accounting policy stated in Note 4. Such provision for impairment is established if there is objective

evidence that the Group will not be able to collect all amounts due according to the original terms of

receivables. Management reassesses the adequacy of any such provision on a regular basis. As at 31

December 2013, the carrying amount of trade and other receivables is approximately RMB21,681,655,000

(net of impairment loss of approximately RMB2,571,171,000) (31 December 2012: carrying amount of

approximately RMB16,731,910,000, net of impairment loss of approximately RMB1,553,384,000).






(f) Impairment loss of goodwill

The Group tests annually whether goodwill has suffered any impairment in accordance with the accounting

policy stated in Note 4. The recoverable amounts of cash-generating units have been determined based

on the higher of the cash-generating unit’s (“CGU”) fair value less costs to sell and its value in use. These

calculations require the use of estimates which are disclosed in Note 25. As at 31 December 2013, the

carrying value of goodwill is approximately RMB533,684,000 (net of accumulated impairment loss of

approximately RMB252,716,000 (31 December 2012: carrying amount of approximately RMB561,612,000,

net of accumulated impairment loss of approximately RMB123,420,000).

Further details of the Group’s goodwill and the results of the review undertaken by management as at 31

December 2013 are set out in Notes 24 and 25 respectively.

(g) Construction contracts

Revenue from individual contracts is recognised under the percentage of completion method which

requires judgment of the management. Anticipated losses are fully provided on contracts when identified.

Management estimates the amount of foreseeable losses of construction work based on the estimation

prepared for the construction contracts. Because of the nature of the activity undertaken in construction

and engineering businesses, the contract activity will usually last for a period over one year and therefore

fall into different accounting periods. During the year ended 31 December 2013, foreseeable losses on

construction contracts of approximately RMB58,348,000 (2012: RMB55,298,000) have been recognised.

The Group reviews and revises the estimates of both contract revenue and contract costs in the budget

prepared for each contract as the contract progresses and regularly reviews the progress of the contracts

and the corresponding costs of the contract revenue. If circumstances arise that may change the original

estimates of revenues, costs or extent of progress toward completion, estimates are revised. These

revisions may result in increases or decreases in estimated revenues or costs and are reflected in the

consolidated statement of profit or loss in the period in which the circumstances that give rise to the

revision become known by management.






(h) Provision for guarantees

The Group follows the guidance of HKAS 37 Provisions, Contingent Liabilities and Contingent Assets

in determining the provision for guarantees. Provisions have been made based on management’s best

estimates and judgments at the date of grant and at the end of the reporting period if it is probable that an

outflow of resources will be required to settle the defaulted guarantees and the amount of such provision

can be measured reliably. The Group’s management considers the fair value of the guarantees at the date

of grant is insignificant and the default risk is low as at 31 December 2012.

(i) Contingent liabilities in respect of litigations and claims

The Group has been engaged in a number of litigations and claims in respect of certain construction works.

Contingent liabilities arising from these litigations and claims have been assessed by management with

reference to legal advice. Provisions on the possible obligation have been made based on management’s

best estimates and judgments. As at 31 December 2012, the carrying amount of provision for litigation

is approximately RMB27,780,000. As at 31 December 2013, full reversal of provision of approximately

RMB27,780,000 have been made and no provision for litigation was noted. Details are set out in Note

41(i).

(j) Provision for warranties

Provisions for the expected cost of warranty obligations under the sale contracts are recognised at the

date of sale of the relevant products, at the directors’ best estimate of the expenditure required to settle

the Group’s obligation. As at 31 December 2013, the carrying amount of provision for warranties is

approximately RMB81,520,000 (2012: RMB65,732,000).

8. TURNOVER

Turnover represents revenue arising from provision of cement equipment and engineering services, production

and sales of cement and high-tech materials, net of discounts, returns and sales related taxes.

2013 2012


Turnover comprises:

– Cement equipment and engineering services 20,950,937 19,798,261

– Cement 24,414,246 20,452,545

– High-tech materials 6,716,133 5,936,265

52,081,316 46,187,071




9. SEGMENT INFORMATION

Information reported to the executive directors of the Company, being the chief operating decision maker, for the

purposes of resource allocation and assessment of segment performance focuses on the nature of business for

the goods supplied and services provided. No operating segments identified by the chief operating decision maker

have been aggregated in arriving at the reportable segments of the Group.

Specifically, the Group’s reportable and operating segments under HKFRS 8 are as follows:

Cement equipment and Provision of engineering equipment and engineering services for

engineering services new dry process cement production lines and mining projects and

equipment manufacturing

Cement Production and sales of cement, clinker and commercial concrete

High-tech materials Production and sales of glass fiber, glass fiber products, specialty fiber,

fiber reinforcement composite materials and standard sand;

equipment and engineering services for glass fiber production

and non-metal mineral fine processing and advance ceramics




9. SEGMENT INFORMATION (Continued)

(a) Segment revenues and results

The following is an analysis of the Group’s revenue and results by reportable and operating segment.


Cement

equipment

and

engineering

services Cement

High-tech

materials Eliminations Total


REVENUE

External sales 20,950,937 24,414,246 6,716,133 – 52,081,316

Inter-segment sales 1,717,420 37,632 86,559 (1,841,611) –

Total 22,668,357 24,451,878 6,802,692 (1,841,611) 52,081,316

Segment results 541,095 3,079,684 589,044 (189,223) 4,020,600

Unallocated operating income

and expenses (28,143)

Interest income 139,248

Finance costs (1,961,946)

Share of results of associates 66,353

Share of results of joint ventures (27,269)

Profit before tax 2,208,843®®





(a) Segment revenues and results (Continued)

For the year ended 31 December 2012 (Restated)

Cement

equipment

and

engineering

services Cement

High-tech

materials Eliminations Total


REVENUE

External sales 19,798,261 20,452,545 5,936,265 – 46,187,071

Inter-segment sales 3,186,868 92,470 59,169 (3,338,507) –

Total 22,985,129 20,545,015 5,995,434 (3,338,507) 46,187,071

Segment results 1,302,340 1,904,043 729,017 (326,240) 3,609,160

Unallocated operating income

and expenses (33,630)

Interest income 170,088

Finance costs (1,683,513)

Share of results of associates 7,365

Share of results of joint ventures (10,674)

Profit before tax 2,058,796

The accounting policies of the operating segments are the same as the Group’s accounting policies

described in Note 4. Segment results represent the profit earned by each segment without allocation of

directors’ remuneration, interest income, finance costs, share of results of associates, share of results of

joint ventures and other head office administrative expenses. This is the measure reported to the chief

operating decision maker for the purposes of resource allocation and performance assessment.

Inter-segment sales are charged at prevailing market rates.





(b) Segment assets and liabilities

The following is an analysis of the Group’s assets and liabilities by reportable and operating segment:

Segment assets

31 December

2013

31 December

2012


Cement equipment and engineering services 19,440,424 16,660,793

Cement 47,455,025 43,039,354

High-tech materials 16,703,183 14,930,419

Total segment assets 83,598,632 74,630,566

Eliminations (2,059,380) (2,848,048)

Unallocated assets 12,972,781 16,222,188

Consolidated assets 94,512,033 88,004,706

Segment liabilities

31 December

2013

31 December

2012


Cement equipment and engineering services 17,777,606 16,523,748

Cement 11,290,430 9,188,914

High-tech materials 4,040,682 3,879,649

Total segment liabilities 33,108,718 29,592,311

Eliminations (3,277,776) (3,340,227)

Unallocated liabilities 36,512,934 34,455,406

Consolidated liabilities 66,343,876 60,707,490





(b) Segment assets and liabilities (Continued)

Segment liabilities (Continued)

For the purposes of monitoring segment performances and allocating resources between segments:

• all assets are allocated to operating segments other than deferred income tax assets and

unallocated assets including interests in associates, interests in joint ventures, investment

properties, available-for-sale financial assets, derivative financial instruments, restricted bank

balances, bank balances and cash and certain unallocated head office assets; and

• all liabilities are allocated to operating segments other than income tax liabilities, deferred income

tax liabilities and unallocated liabilities including derivative financial instruments, short-term financing

bills, borrowings, corporate bonds, medium-term notes, dividend payable and certain unallocated

head office liabilities.





(c) Other segment information


Cementequipment

andengineering

services CementHigh-techmaterials Unallocated Total


Amounts included in the measure of segment results or segment assets:Depreciation on property, plant and equipment and investment properties 248,328 2,191,288 651,862 12,626 3,104,104Amortisation 38,676 100,020 36,732 24 175,452Impairment loss recognised in respect of: – property, plant and equipment – 238,368 1,758 – 240,126 – intangible assets – 129,296 9,717 – 139,013 – trade receivables 552,103 103,579 87,681 – 743,363 – prepayments to suppliers and subcontractors and other receivables 170,680 115,468 33,940 – 320,088 – loan receivables 1,062 4,693 2,758 – 8,513Allowance for inventories 27,635 69,158 51,204 – 147,997Reversal of allowance for inventories – – (12,205) – (12,205)Reversal of provision for litigation (27,780) – – – (27,780)Reversal of impairment of other receivables – – (25,000) – (25,000)Net (gain) loss on disposals of property, plant and equipment (31,321) 5,197 314 – (25,810)Waiver of other payables (4,305) (4,516) (997) – (9,818)Government grants (33,160) (247,810) (246,178) – (527,148)Foreseeable losses on construction contracts 58,348 – – – 58,348Additions to non-current assets (Note) 839,501 6,607,025 1,273,685 6,450 8,726,661

Amounts regularly provided to the chief operating decision maker but not included in the measure of segment results or segment assets:Interest income (89,709) (32,449) (15,769) (1,321) (139,248)Finance costs 104,735 1,211,895 442,019 203,297 1,961,946Share of results of associates (401) (61,205) (425) (4,322) (66,353)Share of results of joint ventures – – 27,269 – 27,269Income tax expense (credit) 288,156 400,468 58,409 (3,601) 743,432Interests in associates 154,322 799 26,704 681,893 863,718

Interests in joint ventures – – 134,238 – 134,238 ®





(c) Other segment information (Continued)For the year ended 31 December 2012 (Restated)

Cementequipment

andengineering

services CementHigh-techmaterials Unallocated Total


Amounts included in the measure of segment results or segment assets:Depreciation on property, plant and equipment and investment properties 221,210 1,794,796 573,915 11,778 2,601,699Amortisation 49,583 101,623 37,274 – 188,480Impairment loss recognised in respect of: – property, plant and equipment – 24,396 503 – 24,899 – trade receivables 262,831 38,670 35,444 – 336,945 – prepayments to suppliers and subcontractors and other receivables 221,181 47,284 79,015 56 347,536 – loan receivables – 1,698 2,875 – 4,573Allowance for inventories 46,868 19,080 15,618 – 81,566Reversal of allowance for inventories – – (10,534) – (10,534)Net gain on disposals of property, plant and equipment (2,653) (6,424) (10,132) – (19,209)Net gain on disposals of prepaid lease payments (436) (76) (1,186) – (1,698)

Gain on a bargain purchase – – (1,619) – (1,619)Net loss (gain) on disposal of subsidiaries – 11,051 (176,145) – (165,094)Waiver of other payables (8,115) (305) (756) – (9,176)Government grants (9,159) (206,211) (258,881) – (474,251)Foreseeable losses on construction contracts 55,298 – – – 55,298Additions to non-current assets (Note) 427,672 5,508,214 4,603,777 152,506 10,692,169

Amounts regularly provided to the chief operating decision maker but not included in the measure of segment results or segment assets:Interest income (109,182) (41,090) (17,776) (2,040) (170,088)Finance costs 76,098 941,170 349,636 316,609 1,683,513Share of results of associates (6,051) (538) (776) – (7,365)Share of results of joint ventures – – 10,674 – 10,674Income tax expense (credit) 324,225 143,236 47,705 (2,210) 512,956Interests in associates 85,160 1,132,466 26,280 150,000 1,393,906Interests in joint ventures – – 162,496 – 162,496

Note: Non-current assets exclude financial instruments and deferred income tax assets. Additions to non-current assets for the year ended 31 December 2013 resulting from acquisitions through business combinations other than common control amounting to RMB1,360,283,000 (2012: RMB1,166,363,000).





(d) Geographical information

The Group operates in six principal geographical areas – the PRC (country of domicile), Middle East, Africa,

other Asian countries, America and Europe.

The Group’s revenue from external customers based on location of operations and information about its

non-current assets by geographical location are detailed as below:

Revenue from

external customers Non-current assets

2013 2012

31 December

2013

31 December

2012

RMB’000 RMB’000 RMB’000 RMB’000(Restated) (Restated)

The PRC 38,703,102 36,258,627 51,660,118 47,891,165

Middle East 2,523,728 1,856,658 24,245 22,187

Africa 4,459,693 3,449,538 7,838 7,306

Other Asian countries 3,725,887 2,563,979 1,021 727

Europe 1,035,380 767,775 – –

America 1,343,221 1,075,955 – –

Others 290,305 214,539 – –

52,081,316 46,187,071 51,693,222 47,921,385

Note: Non-current assets exclude financial instruments and deferred income tax assets.

(e) Information about major customers

During the two years ended 31 December 2013 and 2012, no revenue from transactions with any single

external customer amounted to 10% or more of the Group’s revenue.

10. INTEREST INCOME

2013 2012


Interest income on bank deposits 134,452 167,588

Interest income on loan receivables 4,796 2,500

Total interest income 139,248 170,088




11. OTHER GAINS

2013 2012


Gain on debts restructuring (Note a) 44,250 14,962

Net gain on disposals of property, plant and equipment 25,810 19,209

Net gain on disposals of prepaid lease payments – 1,698

Gain on disposals of available-for-sale financial assets 2,362 2,873

Net gain on disposal of associates (Note 27) 26,024 2,546

Net gain on disposal of subsidiaries (Note 50) – 165,094

Exchange gain on realisation of foreign currency forward contracts 14,700 4,002

Dividend income on available-for-sale financial assets (Note b) 23,883 20,727

Income from sales of scrap materials 1,055 2,454

Gain on a bargain purchase (Note 48 (b) (iii)) – 1,619

Change in fair values of foreign currency forward contracts 4,895 3,946

Penalty income (Note c) 8,627 25,132

Rental income (Note d) 33,093 35,780

Reversal of provision for litigation (Note 41) 27,780 –

Reversal of impairment loss of other receivables (Note 50(ii)) 25,000 –

Waiver of other payables 9,818 9,176

Value-added tax refunds (Note e) 606,245 659,583

Government grants

– utilisation/amortisation of deferred income for the year (Note 44) 212,814 205,485

– grants related to expenses recognised as other gains (Note f) 314,334 268,766

Others 11,145 9,506

1,391,835 1,452,558




11. OTHER GAINS (Continued)

Notes:

(a) During the year, certain subsidiaries of the Company had settled certain borrowings and trade and other payables at a

discount of approximately RMB44,250,000 (2012: RMB14,962,000).

(b) Dividend income from available-for-sale financial assets represented dividend income from listed and unlisted equity

investments.

(c) The penalty income mainly represented the compensation income received from the subcontractors or constructors in

relation to delays of contract works or construction of property, plant and equipment.

(d) Rental income:

2013 2012

RMB’000 RMB’000

(Restated)

Gross rental income from investment properties 33,093 35,780

Less: Direct operating expenses that generate rental income

(included in administrative expenses) (10,081) (10,491)

Net rental income from investment properties 23,012 25,289

(e) The balances represent refunds of value-added tax paid by certain subsidiaries since these subsidiaries produce certain

specific cement products.

(f) These government grants are awarded to the Group by the local government agencies as incentives primarily to

encourage the development of the Group and the contribution to the local economic development.

12. EXCHANGE (LOSS) GAIN

2013 2012


Net exchange (loss) gain (82,078) 3,195

Less: Net foreign exchange loss on bank borrowings (Note 14) (3,185) (1,508)

Exchange (loss) gain arising from the operating activities (85,263) 1,687




13. OTHER EXPENSES

2013 2012


Penalty 31,883 13,990

Donations 10,527 9,928

Others 10,907 7,889

53,317 31,807

14. FINANCE COSTS

2013 2012


Interest expenses

– Bank borrowings wholly repayable within 5 years 1,443,023 1,245,483

– Bank borrowings not wholly repayable within 5 years 27,832 30,824

– Corporate bonds not wholly repayable within 5 years 137,543 137,410

– Medium-term notes wholly repayable within 5 years 323,733 267,833

– Short-term financing bills wholly repayable within 5 years 98,034 49,010

– Other borrowings 42,682 39,975

2,072,847 1,770,535

Less: Amounts capitalised as construction in progress (Note) (127,083) (100,342)

1,945,764 1,670,193

Net foreign exchange gain on bank borrowings (Note 12) (3,185) (1,508)

Discount charges on bank acceptance notes 19,367 14,828

Total finance costs 1,961,946 1,683,513

Note: Borrowing costs capitalised during the year are calculated by applying a capitalisation rate of 6.52% (2012: 6.37%) per

annum to expenditure on qualifying assets.




15. INCOME TAX EXPENSE

The Group has no operations in Hong Kong and is therefore not subject to Hong Kong profits tax for both years.

Certain of the companies now comprising the Group are subject to the PRC enterprise income tax, which has

been provided for based on the statutory income tax rates of 25% (2012: 25%) on the assessable income of each

of these companies during the year as determined in accordance with the relevant PRC income tax rules and

regulations except that certain subsidiaries and jointly controlled entities which were taxed at preferential rate of

15% (2012: 15%).

Taxation on overseas profits has been calculated on the estimated assessable profit for the year at the rates of

taxation prevailing in the jurisdictions in which the Group operates.

The amount of income tax expense charged to the consolidated statement of profit or loss represents:

2013 2012


Current income tax:

– PRC enterprise income tax 892,116 668,476

– Overseas taxation 3,058 1,379

– Under (over) provision in previous years 1,076 (7,086)

896,250 662,769

Deferred income tax (Note 45) – Net effect of changes in tax rates on deferred income tax assets

and liabilities – 4,463

– Other deferred income tax (152,818) (154,276)

(152,818) (149,813)

743,432 512,956




15. INCOME TAX EXPENSE (Continued)

The difference between the actual income tax expense in the consolidated statement of profit or loss and the

amounts which is calculated based on the statutory tax rate of 25% (2012: 25%) is as follows:

2013 2012


Profit before tax 2,208,843 2,058,796

Less: Share of results of associates (66,353) (7,365)

Less: Share of results of joint ventures 27,269 10,674

2,169,759 2,062,105

Tax calculated at the statutory tax rate of 25% (2012: 25%) 542,440 515,526

Tax effect of income not taxable for tax purpose (38,245) (43,585)

Tax effect of expenses not deductible for tax purpose 309,187 120,004

Tax effect of tax losses not recognised 54,054 81,634

Utilisation of tax losses previously not recognised (4,774) (4,175)

Additional deduction arising from research and development expenditure (3,780) (4,960)

Effect of differences in tax rates applicable to certain domestic subsidiaries (114,069) (145,400)

Net effect of changes in tax rates on deferred income tax assets and liabilities – 4,463

Additional deduction arising from equipment produced in the PRC (2,457) (3,465)

Under(over)provision in previous years 1,076 (7,086)

Income tax expense 743,432 512,956

Details of deferred taxation are shown in Note 45.




16. PROFIT FOR THE YEAR

The Group’s profit for the year has been arrived at after charging (crediting):

2013 2012


Cost of inventories recognised as expenses 27,765,664 25,524,507

Auditor’s remuneration 9,500 9,500

Employee benefit expense (including directors’, supervisors’,

chief executive’s and senior management’s emoluments) (Note 17) 3,001,392 2,599,092

Depreciation and amortisation:

– property, plant and equipment 3,092,117 2,590,450

– prepaid lease payments 86,439 111,322

– investment properties 11,987 11,249

– intangible assets 39,340 33,695

– mining rights 49,673 43,463

Operating lease rentals 90,545 84,237

Share of income tax expenses:

– associates 17,307 14,588

– joint ventures 199 498

Research and development costs 873,912 724,563


Provision for warranties (Note 41) (included in cost of sales) 38,331 28,710

Foreseeable losses on construction contracts (included in cost of sales) 58,348 55,298

Loss on deemed disposal of an associate (Note 27) 29,480 –

Impairment loss recognised in respect of:

– trade receivables (included in administrative expenses) 743,363 336,945

– prepayments to suppliers and subcontractors and other receivables

(included in administrative expenses) 320,088 347,536

– loan receivables (included in administrative expenses) 8,513 4,573

– property, plant and equipment (included in administrative expenses) 240,126 24,899

– intangible assets (included in administrative expenses) 139,013 –

– available-for-sales financial assets (included in administrative expenses) 5,330 1,728

Allowance for inventories (included in cost of sales) 147,997 81,566

Reversal of allowance for inventories (included in cost of sales) (12,205) (10,534)




17. EMPLOYEE BENEFITS

2013 2012


Salaries, wages and bonuses 2,155,431 1,874,288

Contributions to pension plans (Note a) 328,998 277,240

Early retirement and supplemental pension benefits (Note 39 and Note b) 20,104 32,524

Housing funds (Note c) 88,366 74,362

Cash-settled share-based payments (Note 40) (871) (459)

Welfare, medical and other expenses 409,364 341,137

3,001,392 2,599,092

Notes:

(a) During the two years ended 31 December 2013 and 2012, the employees of the Company and the subsidiaries in the

PRC participate in various retirement benefit plans organised by the relevant municipal and provincial governments in the

PRC to which the Group is required to make monthly contributions at rates ranging from 18% to 23%, depending on the

applicable local regulations, of the employees’ basic salary for the previous year.

(b) Certain employees of the Group were directed to early retire in previous years. Early retirement benefits are recognised

in the consolidated statement of profit or loss in the period in which the Group entered into an agreement specifying the

terms of redundancy or after the individual employee had been advised of the specific terms. These specific terms vary

among the terminated and early retired employees depending on various factors including position, length of service and

location of the employee concerned.

The Group also provided supplemental pension subsidies or pension contributions to certain employees who retired prior

to 31 December 2006. The costs of providing these pension subsidies and pension contributions are charged to the

consolidated statement of profit or loss so as to spread the service costs over the average service lives of the retirees.

Employees who retire after 31 December 2006 are not entitled to such supplemental pension subsidies or pension

contributions.

(c) These represent contributions to the housing funds (at rates ranging from 6% to 12% of the employees basic salary of

the previous year) in the PRC for both years.




18. DIRECTORS’, SUPERVISORS’, CHIEF EXECUTIVE’S AND SENIOR MANAGEMENT’S EMOLUMENTS

(a) Directors’, supervisors’ and chief executive’s emoluments

2013 2012

RMB’000 RMB’000

Directors, supervisors and the chief executive

– Fee for directors, supervisors and the chief executive 915 990

– Basic salaries, housing allowances and other allowances 1,252 1,162

– Contributions to pension plans 110 66

– Discretionary bonuses 96 687

– Cash-settled share-based payments (36) (201)

2,337 2,704




18. DIRECTORS’, SUPERVISORS’, CHIEF EXECUTIVE’S AND SENIOR MANAGEMENT’S EMOLUMENTS (Continued)

(a) Directors’, supervisors’ and chief executive’s emoluments (Continued)(i) The emoluments of every director, supervisor and the chief executive for the year ended 31

December 2013 were set out below:

Name

Fee fordirectors,

supervisorsand the chief

executive

Basic salaries,housing

allowancesand other

allowances

Contributionsto pension

plansDiscretionary

bonuses

Cash-settledshare-based

payments TotalRMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Executive directors– Mr. Liu Zhijang (Note a) – – – – (12) (12)– Mr. Li Xinhua – – – – (12) (12)

Non-executive directors– Mr. Yu Shiliang (Note b) – – – – (12) (12)– Mr. Zhang Hai – – – – – –– Mr. Tang Baoqi 60 – – – – 60– Mr. Li Jianlun (Note c) – – – – – –– Mr.Yu Guobo (Note c) – – – – – –

Independent non-executive directors– Mr. Leung Chong Shun 180 – – – – 180– Mr. Shi Chungui (Note d) 105 – – – – 105– Mr. Lu Zhengfei 180 – – – – 180– Mr. Wang Shimin 180 – – – – 180– Mr. Zhou Zude 180 – – – – 180

Supervisors– Ms. Xu Weibing – – – – – –– Mr. Wang Jianguo 15 – – – – 15– Mr. Yu Xingmin (Note e) – 621 36 – – 657– Mr. Zhang Renjie 15 – – – – 15– Mr. Qu Xiaoli – 264 37 48 – 349– Mr. Wang Yingcai (Note g) – 367 37 48 – 452

915 1,252 110 96 (36) 2,337

Notes:

a. Re-designated from non-executive director to executive director on 5 February 2013.

b. Re-designated from executive director to non-executive director on 5 February 2013.

c. Appointed as non-executive director on 30 July 2013.

d. Ceased to be an independent non-executive director on 30 July 2013.

e. Resigned from supervisor on 30 July 2013.

f. In addition to the directors’ emoluments disclosed above, certain directors and supervisors of the Company received emoluments from Sinoma Group in aggregate of approximately RMB3,209,350 and RMB511,859 respectively for the year ended 31 December 2013.

g. Appointed as supervisor on 30 July 2013.

h. Li Xinhua is also the chief executive of the Company and his emoluments disclosed above include those for services rendered by him as the chief executive.





(a) Directors’, supervisors’ and chief executive’s emoluments (Continued)

(ii) The emoluments of every director, supervisor and the chief executive for the year ended 31

December 2012 were set out below:

Name

Fee fordirectors,

supervisorsand the chief

executive

Basic salaries,housing

allowancesand other

allowances

Contributionsto pension

plansDiscretionary

bonuses

Cash-settledshare-based

payments TotalRMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Executive directors– Mr. Tan Zhongming (Note a) – – – – (132) (132)– Mr Yu Shiliang (Note b) – – – – (23) (23)– Mr. Li Xinhua – – – – (23) (23)

Non-executive directors– Mr. Liu Zhijiang – – – – (23) (23)– Mr. Zhang Hai – – – – – –– Mr. Tang Baoqi 60 – – – – 60

Independent non-executive directors– Mr. Leung Chong Shun 180 – – – – 180– Mr. Shi Chungui 180 – – – – 180– Mr. Lu Zhengfei 180 – – – – 180– Mr. Wang Shimin 180 – – – – 180– Mr. Zhou Zude 180 – – – – 180

Supervisors– Ms. Xu Weibing – – – – – –– Mr. Wang Jianguo 15 – – – – 15– Mr. Yu Xingmin – 905 33 639 – 1,577– Mr. Zhang Renjie 15 – – – – 15– Mr. Qu Xiaoli – 257 33 48 – 338

990 1,162 66 687 (201) 2,704

Notes:

a. Deceased on 2 September 2012.

b. Resigned from non-executive director and appointed as executive director on 24 September 2012.

c. In addition to the directors’ emoluments disclosed above, certain directors and supervisors of the Company received emoluments from Sinoma Group in aggregate of approximately RMB2,979,000 and RMB576,000 respectively for the year ended 31 December 2012.

d. Li Xinhua is also the chief executive of the Company and his emoluments disclosed above include those for services rendered by him as the chief executive.





(a) Directors’, supervisors’ and chief executive’s emoluments (Continued)

(iii) During the two years ended 31 December 2013 and 2012, no directors or supervisors or the

chief executive of the Company agreed to waive or waived any emoluments and no emoluments

were paid by the Company to any of the directors or supervisors or, the chief executive as an

inducement to join or upon joining the Group or as compensation for loss of office.

The discretionary bonuses of directors, supervisors and the chief executive for the two years ended

31 December 2013 and 2012 is determined by the remuneration committee and having regard to

the performance of individuals and market trends.

(b) Five highest paid individuals

(i) The five individuals whose emoluments were the highest in the Group for the year ended 31

December 2013 include one supervisor (2012: one supervisor) whose emoluments are reflected

in the analysis presented above. The emoluments payable to the remaining four (2012: four)

individuals during the year are as follows:

2013 2012

RMB’000 RMB’000

Basic salaries, housing allowances and other allowances 2,876 3,477

Contributions to pension plans 146 211

Discretionary bonuses 660 2,828

3,682 6,516





(b) Five highest paid individuals (Continued)

(ii) The emoluments of the above individuals fell within the following bands:

2013 2012

HK$1 to HK$1,000,000 (2013: equivalent to

RMB1 to RMB797,899 and 2012:

equivalent to RMB1 to RMB814,730) 3 –

HK$1,500,001 to HK$2,000,000 (2013: equivalent

to RMB1,196,851 to RMB1,595,800 and 2012:

equivalent to RMB1,222,096 to RMB1,629,460) – 1

HK$2,000,001 to HK$2,500,000 (2013: equivalent

to RMB1,595,801 to RMB1,994,750 and 2012:

equivalent to RMB1,629,461 to RMB2,036,825) 1 3

4 4

(iii) During the two years ended 31 December 2013 and 2012, no individuals of the Company agreed

to waive or waived any emoluments and no emoluments were paid by the Company to any of the

highest paid individuals as an inducement to join or upon joining the Group or as compensation for

loss of office.

19. DIVIDENDS

2013 2012

RMB’000 RMB’000

Dividends paid and recognised as distribution during the year:

– 2012 final dividend: RMB0.03 (2012: 2011 final dividend RMB0.06)

per share 107,144 214,288

The 2013 final dividend of RMB0.02 (2012: RMB0.03) per share (tax inclusive) has been proposed by the directors

and is subject to the approval by the shareholders at the forthcoming annual general meeting.




20. EARNINGS PER SHARE

(a) Basic

Basic earnings per share is calculated by dividing the profit for the year attributable to owners of the

Company by the weighted average number of ordinary shares in issue during each of the year ended 31

December 2013 and 2012.

2013 2012

(Restated)

Profit for the year attributable to owners of the Company (RMB’000) 397,512 452,293

Weighted average number of ordinary shares in issue (’000) 3,571,464 3,571,464

Basic earnings per share (RMB) 0.111 0.127

(b) Diluted

Diluted earnings per share was the same as the basic earnings per share as there were no potential

dilutive ordinary shares outstanding during the two years ended 31 December 2013 and 2012.




21. PROPERTY, PLANT AND EQUIPMENT

Buildings

Plant and

machinery

Motor

vehicles

Furniture,

office

and other

equipment

Construction-

in-progress Total


At 1 January 2012, as restated 11,490,223 15,598,152 946,182 660,508 5,516,184 34,211,249

Additions 1,996,860 3,113,161 374,493 299,423 3,098,155 8,882,092

Attributable to acquisition of subsidiaries 646,177 199,258 19,551 2,814 – 867,800

Disposals (3,178) (6,602) (3,917) (16,267) (8,268) (38,232)

Eliminated on disposal of a subsidiary (21,514) – – – – (21,514)

Reclassification upon completion 1,364,131 1,373,361 – – (2,737,492) –

Classified as assets held for sale – – – – – –

Depreciation charged for the year (576,630) (1,637,746) (173,728) (202,346) – (2,590,450)

Impairment loss recognised in the

consolidated statement of profit or loss (15,444) (9,182) (230) (43) – (24,899)

At 31 December 2012 and

1 January 2013, as restated 14,880,625 18,630,402 1,162,351 744,089 5,868,579 41,286,046

Additions 2,685,767 3,426,210 318,953 172,531 176,193 6,779,654

Attributable to acquisition of subsidiaries 500,836 565,245 36,623 12,715 9,573 1,124,992

Disposals (216,797) (222,700) (140,865) (67,901) – (648,263)

Reclassification upon completion 1,597,851 1,569,427 51,234 3,094 (3,221,606) –

Depreciation charged for the year (748,517) (1,926,432) (241,805) (175,363) – (3,092,117)


consolidated statement of profit or loss (134,423) (87,366) (3,440) (14,897) – (240,126)

At 31 December 2013 18,565,342 21,954,786 1,183,051 674,268 2,832,739 45,210,186

At 31 December 2013

Cost 21,106,123 29,747,984 1,712,522 1,329,718 2,849,278 56,745,625

Accumulated depreciation (2,309,485) (7,673,029) (516,957) (628,016) (16,539) (11,144,026)

Accumulated impairment loss (231,296) (120,169) (12,514) (27,434) – (391,413)

Carrying values 18,565,342 21,954,786 1,183,051 674,268 2,832,739 45,210,186

At 31 December 2012, as restated

Cost 17,380,239 25,282,256 1,528,152 1,295,780 5,868,579 51,355,006

Accumulated depreciation (2,359,042) (6,599,713) (356,469) (535,203) – (9,850,427)

Accumulated impairment loss (140,572) (52,141) (9,332) (16,488) – (218,533)

Carrying values 14,880,625 18,630,402 1,162,351 744,089 5,868,579 41,286,046




21. PROPERTY, PLANT AND EQUIPMENT (Continued)

(a) Depreciation of the Group’s property, plant and equipment has been charged to the consolidated statement

of profit or loss as follows:

2013 2012


Cost of sales 2,696,132 2,253,315

Selling and marketing expenses 62,988 52,924

Administrative expenses 332,997 284,211

3,092,117 2,590,450

(b) The buildings situated on the land located in the PRC under medium term leases.

(c) As at 31 December 2013, borrowings are secured by certain property, plant and equipment of the Group

with an aggregate carrying values of approximately RMB1,079,590,000 (2012: RMB3,305,167,000) (Note

38).

(d) During the year, the directors of the Company conducted a review of the Group’s property, plant and

equipment and determined that a number of those assets were impaired, due to an adverse operation

environment, physical damage and technical obsolescence. Accordingly, impairment loss of approximately

RMB240,126,000 (2012: RMB24,899,000) has been recognised for those assets, which are used in the

cement segment and high-tech materials segment. The recoverable amounts of the relevant assets have

been determined on the basis of their values in use by adopting discount rate ranged from 6.23% to

11.24% (2012: ranged from 5.86% to 10.70%).

(e) The above items of property, plant and equipment are depreciated on a straight-line basis at the following

rates per annum:

Buildings 2.5% to 5%

Plant and machinery 6.67% to 20%

Motor vehicles 10% to 20%

Furniture, office and other equipment 10% to 20%

(f) At 31 December 2013, the Group has not obtained the formal ownership certificates for certain

properties including in the buildings above, the carrying values of which at that date were approximately

RMB222,917,000 (2012: RMB589,386,000). In the opinion of the directors of the Company, the absence

of formal title to these properties does not impair their values to the Group as the Group has paid the full

purchase consideration of these buildings and the probability of being evicted on the ground of an absence

of formal title is remote.




22. PREPAID LEASE PAYMENTS

31 December

2013

31 December

2012


Cost 4,506,258 3,985,272

Accumulated amortisation (521,247) (434,808)

Carrying values 3,985,011 3,550,464

Analysed for reporting purposes as:

Current asset 131,052 119,028

Non-current asset 3,853,959 3,431,436

3,985,011 3,550,464

(a) Prepaid lease payments represent the Group’s interests in land which are held under medium-term leases

between 30 to 50 years, all located in the PRC.

(b) Amortisation of prepaid lease payments has been charged to the cost of sales.

(c) As at 31 December 2013, borrowings are secured by certain prepaid lease payments of the Group with an

aggregate carrying values of approximately RMB49,330,000 (2012: RMB170,382,000) (Note 38).

(d) At 31 December 2012, the Group has not obtained the formal ownership certificates for certain prepaid

lease payments above, the carrying values of which at that date were approximately RMB16,075,000. In

the opinion of the directors of the Company, the absence of formal title to these prepaid lease payments

does not impair their values to the Group as the Group has paid the full purchase consideration of these

prepaid lease payments and the probability of being evicted on the ground of an absence of formal title is

remote. At 31 December 2013, the Group has obtained the formal ownership certificates for all the above

prepaid lease payments.




23. INVESTMENT PROPERTIES

2013 2012

RMB’000 RMB’000

At 1 January

Cost 232,415 232,415

Accumulated depreciation (59,100) (47,851)

Carrying values 173,315 184,564

At 1 January 173,315 184,564

Additions 14,676 –

Depreciation charged for the year (11,987) (11,249)

At 31 December 176,004 173,315

At 31 December

Cost 247,091 232,415

Accumulated depreciation (71,087) (59,100)


Fair values at 31 December (Note b) 732,907 639,933

(a) The investment properties are situated on pieces of land which are held under medium term leases of

which are located in the PRC.

(b) The fair values of investment properties as at 31 December 2013 and 2012 have been arrived at on the

basis of a valuation carried out by Greater China Appraisal Limited, an independent qualified valuer not

connected with the Group. The valuation was determined by reference to the rentals achieved in the

lettable units of the properties as well as other lettings of similar properties in the neighbourhood are

assessed and discounted at the market yield expected by investors for this type of properties based on

income approach. There has been no change from the valuation technique used in prior year. One of the

key inputs used in valuing the investment properties was the discounted rates used. The discount rate is

determined by reference to the yields derived from analysing the sales transactions of similar commercial

properties in related location and adjusted to take into account the market expectation from property

investors to reflect factors specific to the Group’s investment properties, which ranged from 3.50% to

7.00%. A slightly decreased in the discounted rate used would result in a significant increase in fair value

measurement of the investment properties, and vice versa.

(c) All of the Group’s investment properties are held to earn rentals.

(d) In estimating the fair value of the properties, the highest and best use of the properties is their current use.




23. INVESTMENT PROPERTIES (Continued)

(e) Details of the Group’s investment properties and information about the fair value hierarchy as at 31

December 2013 are as follows:

Fair value

Level 3

As at

31/12/2013

RMB’000 RMB’000

Commercial properties units located in PRC 732,907 732,907

(f) There were no transfer of fair value measurement between Level 2 and Level 3 during the year.

(g) The above investment properties are depreciated on a straight-line basis over the shorter of the term of

the lease and 30 years.

(h) The following amounts have been recognised in the consolidated statement of profit or loss:

2013 2012

RMB’000 RMB’000

Rental income recorded as other gains 33,093 35,780

Depreciation recorded as administrative expenses 11,987 11,249




24. INTANGIBLE ASSETS

Goodwill

Patent and

proprietary

technologies

Customer

relationships Trademarks

Computer

software

and others Total


At 1 January 2012 415,052 18,455 – 45,114 23,030 501,651

Additions – 99,634 – 3,903 20,318 123,855

Attributable to acquisition of subsidiaries 146,560 – – – – 146,560

Amortisation charged for the year – (21,260) – (2,581) (9,854) (33,695)

At 31 December 2012 and 1 January 2013 561,612 96,829 – 46,436 33,494 738,371

Additions – 15,470 – 16,000 18,714 50,184

Attributable to acquisition of subsidiaries 101,368 – 7,832 – 2,442 111,642

Amortisation charged for the year – (16,369) (1,468) (12,905) (8,598) (39,340)


consolidated statement of profit or loss (129,296) (9,717) – – – (139,013)

At 31 December 2013 533,684 86,213 6,364 49,531 46,052 721,844

At 31 December 2013

Cost 786,400 195,398 40,169 86,607 115,694 1,224,268

Accumulated amortisation – (97,890) (33,805) (37,076) (69,642) (238,413)

Accumulated impairment loss (252,716) (11,295) – – – (264,011)

Carrying values 533,684 86,213 6,364 49,531 46,052 721,844

At 31 December 2012

Cost 685,032 179,928 32,337 70,607 93,317 1,061,221

Accumulated amortisation – (81,521) (32,337) (24,171) (59,823) (197,852)

Accumulated impairment loss (123,420) (1,578) – – – (124,998)

Carrying values 561,612 96,829 – 46,436 33,494 738,371




24. INTANGIBLE ASSETS (Continued)

(a) Amortisation of intangible assets has been charged in administrative expenses.

(b) The goodwill impairment assessment is based on the recoverable amount of the CGU which is explained

in Note 4 above. Particulars regarding impairment testing on goodwill are disclosed in Note 25.

(c) During the year, the directors of the Company conducted a review of the Group’s intangible assets other

than goodwill and determined that certain proprietary technologies were impaired, due to an adverse

operation environment. Accordingly, impairment loss of approximately RMB9,717,000 has been recognised

for that assets, which are used in the high-tech materials segment. The recoverable amounts of the

relevant assets have been determined on the basis of their values in use.

(d) The above items of intangible assets are amortised on a straight-line basis at the following rates per

annum:

Patent and proprietary technologies 10% to 33.33%

Customer relationships 20% to 33.33%

Trademarks 5% to 10%

Computer software and others 20% to 33.33%




25. IMPAIRMENT TESTING ON GOODWILL

For the purposes of impairment testing, goodwill set out in Note 24 have been allocated to ten individual CGUs.

The carrying amounts of goodwill (net of accumulated impairment losses) as at 31 December 2013 allocated to

these units are as follows:

2013 2012

RMB’000 RMB’000

High-tech materials segment – Shandong Taishan

Composite Materials Co., Ltd (“Taishan Composite”) 22,868 22,868

Cement segment – Yixing Tianshan Cement Co. Ltd.

(“Yixing Tianshan”) 22,718 22,718

Cement segment – Xinjiang Tianshan Cement Co. Ltd.

(“Tianshan Cement”) 2,852 2,852

Cement segment – Gansu Qilianshan Building Materials Holdings

Company Limited (“Qilianshan Holdings”) 357,693 357,693

Cement segment – Tianshui China Concrete Engineering Co. Ltd.

(“Tianshui China”) 1,002 1,002

Cement segment – Gansu Gulangxia Cement Co. Ltd.

(“Gansu Gulangxia”) – 7,220

Cement segment – Xinjiang Wujie Building Materials Testing Co. Ltd.

(“Xinjiang Wujie”) 699 699

Cement segment – Pingluo Golden Greatwall Concrete Co., Ltd.

(“Pingluo Golden”) – 344

Cement segment – Xiahe Anduo Cement Co. Ltd.

(“Xiahe Anduo”) 24,484 145,290

Cement segment – Ningxia Yuhao Concrete Co., Ltd.

(“Ningxia Yuhao”) – 926

Cement segment – Gansu Zhangye Julong Building Materials Co., Ltd.

(“Zhangye Julong”) 26,014 –

Cement equipment and engineering services segment – LNV Technology

Private Limited (“LNV Technology”) 57,765 –

Cement segment – Wuhai City Xishui Cement Company Limited

(“Wuhai Xishui”) 2,518 –

Cement segment – Longnan Runji Cement Company Limited

(“Runji Cement”) 15,071 –

533,684 561,612




25. IMPAIRMENT TESTING ON GOODWILL (Continued)

During the year ended 31 December 2013, impairment loss of approximately RMB129,296,000 has been

recognised in respect of the goodwill arising from Gansu Gulangxia, Pingluo Golden, Xiahe Anduo and Ningxia

Yuhao since the expected future performance is expected to be less optimistic.

During the year ended 31 December 2012, management of the Group determines that there are no impairments

of any of its CGU containing goodwill.

The basis of the recoverable amounts of the above CGUs and their major underlying assumptions are summarised

below:

Taishan Composite Group

The recoverable amount of this unit has been determined based on a value in use calculation. That calculation

uses cash flow projections based on financial budgets approved by Taishan Composite Group’s management

covering a five-year period, and discount rate of 9.63% (2012: 10.77%) that reflects current market assessment

of the time value of money and the risks specific to this unit. Taishan Composite Group’s cash flows beyond

the five-year period are assumed constant with zero growth rate. Other key assumptions for the value in use

calculations relate to the estimation of cash inflows/outflows which include budgeted sales, and gross profit

margin of 17.28% (2012: 18.13%). Such estimation is based on the unit’s past performance and management’s

expectations for the market development. Management of Taishan Composite Group believes that any reasonably

possible change in any of these assumptions would not cause the aggregate carrying amount of Taishan

Composite Group to exceed the aggregate recoverable amount of Taishan Composite Group.

Yixing Tianshan


uses cash flow projections based on financial budgets approved by Yixing Tianshan’s management covering a

five-year period, and discount rate of 12.81% (2012: 11.84%) that reflects current market assessment of the

time value of money and the risks specific to this unit. Yixing Tianshan’s cash flows beyond the five-year period

are assumed constant with zero growth rate. Other key assumptions for the value in use calculations relate to

the estimation of cash inflows/outflows which include budgeted sales, and gross profit margin of 11.72% to

13.83% (2012: 11.38% to 13.34%). Such estimation is based on the unit’s past performance and management’s

expectations for the market development. Management of Yixing Tianshan believes that any reasonably possible

change in any of these assumptions would not cause the aggregate carrying amount of Yixing Tianshan to exceed

the aggregate recoverable amount of Yixing Tianshan.

Tianshan Cement Group


uses cash flow projections based on financial budgets approved by Tianshan Cement Group’s management

covering a five-year period, and discount rate of 8.40% (2012: 9.60%) that reflects current market assessment of

the time value of money and the risks specific to this unit. Tianshan Cement Group’s cash flows beyond the five-

year period are assumed constant with zero growth rate. Other key assumptions for the value in use calculations

relate to the estimation of cash inflows/outflows which include budgeted sales, and gross profit margin of 21.93%

(2012: 22.75%). Such estimation is based on the unit’s past performance and management’s expectations for the

market development. Management of Tianshan Cement Group believes that any reasonably possible change in

any of these assumptions would not cause the aggregate carrying amount of Tianshan Cement Group to exceed

the aggregate recoverable amount of Tianshan Cement Group.





Qilianshan Holdings


uses cash flow projections based on financial budgets approved by Qilianshan Holdings’s management covering a

five-year period, and discount rate of 10.15% (2012: 9.74%) that reflects current market assessment of the time

value of money and the risks specific to this unit. Qilianshan Holdings’s cash flows beyond the five-year period




expectations for the market development.

Management of Qilianshan Holdings believes that any reasonably possible change in any of these assumptions

would not cause the aggregate carrying amount of Qilianshan Holdings to exceed the aggregate recoverable

amount of Qilianshan Holdings.

Tianshui China


uses cash flow projections based on financial budgets approved by Tianshui China’s management covering a

five-year period, and discount rate of 10.48% (2012: 11.88%). that reflects current market assessment of the

time value of money and the risks specific to this unit. Tianshui China’s cash flows beyond the five-year period




expectations for the market development. Management of Tianshui China believes that any reasonably possible

change in any of these assumptions would not cause the aggregate carrying amount of Tianshui China to exceed

the aggregate recoverable amount of Tianshui China.

Gansu Gulangxia

The recoverable amount of approximately RMB12,804,000 this unit has been determined based on a value in use

calculation. That calculation uses cash flow projections based on financial budgets approved by Gansu Gulangxia’s

management covering a five-year period, and discount rate of 12.24% (2012: 13.15%) that reflects current market

assessment of the time value of money and the risks specific to this unit. Gansu Gulangxia’s cash flows beyond



margin of 5.73% to 7.30% (2012: 8.92% to 12.10%). Such estimation is based on the unit’s past performance

and management’s expectations for the market development. Management of Gansu Gulangxia believes that any

reasonably possible change in any of these assumptions would not cause the aggregate carrying amount of Gansu

Gulangxia to exceed the aggregate recoverable amount of Gansu Gulangxia.





Xinjiang Wujie


uses cash flow projections based on financial budgets approved by Xinjiang Wujie’s management covering a

five-year period, and discount rate of 18.00% (2012: 18.00%) that reflects current market assessment of the

time value of money and the risks specific to this unit. Xinjiang Wujie’s cash flows beyond the five-year period

are assumed constant with zero growth rate. Other key assumptions for the value in use calculations relate

to the estimation of cash inflows/outflows which include budgeted sales, and gross profit margin of 73.80%

(2012: 76.20%). Such estimation is based on the unit’s past performance and management’s expectations for

the market development. Management of Xinjiang Wujie believes that any reasonably possible change in any of

these assumptions would not cause the aggregate carrying amount of Xinjiang Wujie to exceed the aggregate

recoverable amount of Xinjiang Wujie.

Pingluo Golden


calculation. That calculation uses cash flow projections based on financial budgets approved by Pingluo Golden’s


assessment of the time value of money and the risks specific to this unit. Pingluo Golden’s cash flows beyond




expectations for the market development. Management of Pingluo Golden believes that any reasonably possible

change in any of these assumptions would not cause the aggregate carrying amount of Pingluo Golden to exceed

the aggregate recoverable amount of Pingluo Golden.

Xiahe Anduo

The recoverable amount of approximately RMB310,665,000 this unit has been determined based on a value in

use calculation. That calculation uses cash flow projections based on financial budgets approved by Xiahe Anduo’s


assessment of the time value of money and the risks specific to this unit. Xiahe Anduo’s cash flows beyond



margin of 21.38% to 30.00% (2012: 33.99% to 36.77%). Such estimation is based on the unit’s past performance

and management’s expectations for the market development. Management of Xiahe Anduo believes that any

reasonably possible change in any of these assumptions would not cause the aggregate carrying amount of Xiahe

Anduo to exceed the aggregate recoverable amount of Xiahe Anduo.





Ningxia Yuhao


calculation. That calculation uses cash flow projections based on financial budgets approved by Ningxia Yuhao’s


assessment of the time value of money and the risks specific to this unit. Ningxia Yuhao’s cash flows beyond




expectations for the market development. Management of Ningxia Yuhao believes that any reasonably possible

change in any of these assumptions would not cause the aggregate carrying amount of Ningxia Yuhao to exceed

the aggregate recoverable amount of Ningxia Yuhao.

Zhangye Julong


uses cash flow projections based on financial budgets approved by Zhangye Julong’s management covering a

five-year period, and discount rate of 12.70% that reflects current market assessment of the time value of money

and the risks specific to this unit. Zhangye Julong’s cash flows beyond the five-year period are assumed constant

with zero growth rate. Other key assumptions for the value in use calculations relate to the estimation of cash

inflows/outflows which include budgeted sales, and gross profit margin of 13.80%. Such estimation is based

on the unit’s past performance and management’s expectations for the market development. Management of

Zhangye Julong believes that any reasonably possible change in any of these assumptions would not cause the

aggregate carrying amount of Zhangye Julong to exceed the aggregate recoverable amount of Zhangye Julong.

LNV Technology


uses cash flow projections based on financial budgets approved by LNV Technology’s management covering a

five-year period, and discount rate of 19.68% that reflects current market assessment of the time value of money

and the risks specific to this unit. LNV Technology’s cash flows beyond the five-year period are assumed constant

with zero growth rate. Other key assumptions for the value in use calculations relate to the estimation of cash

inflows/outflows which include budgeted sales, and gross profit margin of 30.00%. Such estimation is based

on the unit’s past performance and management’s expectations for the market development. Management of

LNV Technology believes that any reasonably possible change in any of these assumptions would not cause the

aggregate carrying amount of LNV Technology to exceed the aggregate recoverable amount of LNV Technology.

Wuhai Xishui


uses cash flow projections based on financial budgets approved by Wuhai Xishui’s management covering a five-

year period, and discount rate of 8.52% that reflects current market assessment of the time value of money and

the risks specific to this unit. Wuhai Xishui’s cash flows beyond the five-year period are assumed constant with

zero growth rate. Other key assumptions for the value in use calculations relate to the estimation of cash inflows/

outflows which include budgeted sales, and gross profit margin of 12.84%. Such estimation is based on the unit’s

past performance and management’s expectations for the market development. Management of Wuhai Xishui

believes that any reasonably possible change in any of these assumptions would not cause the aggregate carrying

amount of Wuhai Xishui to exceed the aggregate recoverable amount of Wuhai Xishui.





Runji Cement


uses cash flow projections based on financial budgets approved by Runji Cement’s management covering a five-

year period, and discount rate of 11.28% that reflects current market assessment of the time value of money and

the risks specific to this unit. Runji Cement’s cash flows beyond the five-year period are assumed constant with

zero growth rate. Other key assumptions for the value in use calculations relate to the estimation of cash inflows/

outflows which include budgeted sales, and gross profit margin of 18.47%. Such estimation is based on the unit’s

past performance and management’s expectations for the market development. Management of Runji Cement

believes that any reasonably possible change in any of these assumptions would not cause the aggregate carrying

amount of Runji Cement to exceed the aggregate recoverable amount of Runji Cement.

26. MINING RIGHTS

2013 2012

RMB’000 RMB’000

At 1 January

Cost 625,850 576,466



At 1 January 483,087 477,166

Additions 50,700 33,860

Attributable to acquisition of subsidiaries 28,831 15,524

Amortisation charged for the year (49,673) (43,463)

At 31 December 512,945 483,087

At 31 December

Cost 705,381 625,850



Mining rights are amortised over its concession period from 3 years to 30 years. Amortisation of mining rights has

been charged to cost of sales.




27. INTERESTS IN ASSOCIATES

2013 2012

RMB’000 RMB’000

Cost of investment in associates

Unlisted equity interests 656,619 1,129,233

Share of post-acquisition profits and other comprehensive income,

net of dividend received 207,099 264,673

863,718 1,393,906

Note:

In the opinion of the directors of the Company, no individual associate principally affected the results for the year or formed a

substantial portion of the net assets of the Group. To give details of the associates would, in the opinion of the directors of the

Company, result in particulars of excessive length.

On 2 April 2013, the Group disposed of its 7.44% equity interests in Beijing Tongda Refractory Technologies Co., Ltd., to an

independent third party for a consideration in aggregate of approximately RMB54,491,000. The carrying amount of the 7.44%

investment on the date of disposal is approximately RMB59,922,000 and loss on disposal of approximately RMB5,431,000 was

recognised in profit or loss for the year ended 31 December 2013.

On 7 August 2013, the Group disposed of its 45% equity interests in Baotou Xishui Cement Co., Ltd., being the entire equity

interests held by the Group, to an independent third party for a consideration of RMB49,700,000. The carrying amount of the

45% investment on the date of disposal is approximately RMB71,464,000 and loss on disposal of approximately RMB21,764,000

was recognised in profit or loss for the year ended 31 December 2013.

On 18 November 2013, the Group disposed of its 31.64% equity interests in Xinjiang Yili Nangang Building Materials Co., Ltd.,

being the entire equity interests held by the Group, to an independent third party for a consideration of RMB155,829,000. The

carrying amount of the 31.64% investment on the date of disposal is approximately RMB102,610,000 and gain on disposal of

approximately RMB53,219,000 was recognised in profit or loss for the year ended 31 December 2013.

On 21 June 2013, the Group acquired additional 55% equity interest in Wuhai Xishui as transaction details stated in Note 48 (a) (iii).

After the completion of transaction, the Group’s interest in Wuhai Xishui was increased to 100%. The carrying amount and fair

value of the 45% equity interests investment on the transaction date is approximately RMB218,170,000 and RMB188,690,000

respectively. A loss on deemed disposal of interests in associate approximately RMB29,480,000 was recognised in the

consolidated statement of profit or loss for the year ended 31 December 2013.




27. INTERESTS IN ASSOCIATES (Continued)

The financial information and carrying amount in aggregate, of the Group’s interests that are not individually

material and are accounted for using the equity method are set out below:

2013 2012

RMB’000 RMB’000

The Group’s share of loss (net of dividend received) 66,353 7,365

The Group’s share of other comprehensive income (expenses) – –

The Group’s share of total comprehensive income (expenses) 66,353 7,365

Aggregate carrying amount of the Group’s interest in immaterial associates 863,718 1,393,906

28. INTERESTS IN JOINT VENTURES

Details of the Group’s investments in joint ventures are as follows:

2013 2012

RMB’000 RMB’000(restated)

Cost of investment in joint ventures

Unlisted equity interests 123,940 123,940

Share of post-acquisition profits and other comprehensive income 10,298 38,556

134,238 162,496

Note:

In the opinion of the directors of the Company, no individual joint venture principally affected the results for the year or formed

a substantial portion of the net assets of the Group. To give details of the joint ventures would, in the opinion of the directors of

the Company, result in particulars of excessive length.

The financial information and carrying amount in aggregate, of the Group’s interests that are not individually

material and are accounted for using the equity method are set out below:

2013 2012

RMB’000 RMB’000

The Group’s share of loss (27,269) (10,674)

The Group’s share of total comprehensive expenses (27,269) (10,674)

Aggregate carrying amount of the Group’s interest in joint ventures 134,238 162,496




29. AVAILABLE-FOR-SALE FINANCIAL ASSETS

31 December

2013

31 December

2012


Measured at fair value

Listed equity securities in PRC 1,829,356 2,131,214

Measured at cost

Unlisted equity securities in PRC 302,405 263,366

Less: Impairment loss recognised (109,206) (106,260)

193,199 157,106

2,022,555 2,288,320

(a) The listed equity investments are measured at fair value.

(b) Included in the unlisted equity investments at cost are investments with net carrying amount of

approximately RMB193,199,000 (2012: RMB157,106,000), after accumulated impairment loss of

approximately RMB109,206,000 (2012: RMB106,260,000), measured at cost less impairment loss because

the range of reasonable fair value estimates is so significant that the directors of the Company are of

the opinion that their fair value cannot be measured reliably. As at 31 December 2013, approximately

RMB5,330,000 (2012: 2,946,000) of the Group’s unlisted equity investments were individually determined

to be impaired on the basis of cessation of business of a unlisted company included in the unlisted equity

investments at cost.

(c) As at 1 January 2012, included in unlisted equity securities are investments in unlisted domestic shares

in BBMG Corporation, a company listed on the Shanghai Stock Exchange. The Group’s investments in the

domestic shares became listed on 1 March 2012.

(d) During the year ended 31 December 2013, the Group invested an additional investment in unlisted equity

securities with amount approximately of RMB42,182,000.

(e) During the year ended 31 December 2013 and 2012, unlisted equity securities measured at cost with a net

carrying amount of approximately RMB759,000 (2012: RMB2,108,000) were disposed of and resulted in a

gain of approximately RMB2,362,000 (2012: a gain of approximately RMB2,873,000).

(f) All available-for-sale financial assets are denominated in RMB.




30. DERIVATIVE FINANCIAL INSTRUMENTS

Derivatives not under hedge accounting:

Current

2013 2012RMB’000 RMB’000

Derivative financial assets – Foreign currency forward contracts 21,169 4,708

Derivative financial liabilities – Foreign currency forward contracts – 657

As at 31 December 2013, major terms of the foreign currency forward contracts are as follows:

Notional amounts Maturities Exchange rates

Sell USD500,000 30 April 2014 RMB6.1980:US$1Sell USD7,500,000 30 May 2014 RMB6.2047:US$1Sell USD300,000 28 March 2014 RMB6.0758:US$1Sell USD700,000 30 July 2014 RMB6.0878:US$1Sell USD10,000,000 27 June 2014 RMB6.2122:US$1Sell USD17,000,000 29 August 2014 RMB6.1208:US$1Sell USD20,000,000 27 March 2014 RMB6.4376:US$1Sell USD20,000,000 26 September 2014 RMB6.1184:US$1Sell USD1,000,000 30 October 2014 RMB6.1212:US$1Sell USD8,000,000 28 November 2014 RMB6.1218:US$1Sell USD15,000,000 22 December 2014 RMB6.1236:US$1Sell USD2,744,000 15 January 2014 RMB6.2094:US$1Sell USD4,656,000 28 February 2014 RMB6.2191:US$1Sell USD5,800,000 17 March 2014 RMB6.2323:US$1Sell USD5,120,000 15 April 2014 RMB6.2421:US$1Sell USD4,400,000 15 May 2014 RMB6.2560:US$1Sell USD10,976,000 1 January 2014 RMB6.1960:US$1Sell USD18,624,000 17 February 2014 RMB6.2054:US$1Sell USD23,200,000 17 March 2014 RMB6.2126:US$1Sell USD20,480,000 15 April 2014 RMB6.2202:US$1Sell USD17,600,000 15 May 2014 RMB6.2281:US$1Buy USD1,355,000 27 August 2014 RMB6.2200:US$1Buy USD1,355,000 12 August 2014 RMB6.2300:US$1Buy USD1,355,000 10 July 2014 RMB6.2300:US$1Buy USD1,355,000 11 June 2014 RMB6.2300:US$1Buy USD1,355,000 12 May 2014 RMB6.2300:US$1Buy USD1,355,000 10 April 2014 RMB6.2300:US$1Buy USD1,355,000 12 March 2014 RMB6.2300:US$1Buy USD1,355,000 13 February 2014 RMB6.2300:US$1Buy USD1,355,000 10 January 2014 RMB6.2300:US$1




30. DERIVATIVE FINANCIAL INSTRUMENTS (Continued)

As at 31 December 2012, major terms of the foreign currency forward contracts were as follows:

Notional amounts Maturities Exchange rates

Sell US$4,000,000 6 January 2013 RMB6.4190: US$1

Sell US$10,000,000 31 January 2013 RMB6.4311: US$1

Sell US$1,000,000 28 February 2013 RMB6.4351: US$1

Sell US$2,000,000 1 April 2013 RMB6.4436: US$1

Sell US$3,000,000 31 December 2013 RMB6.5111: US$1

Sell US$1,000,000 27 March 2013 RMB6.4313: US$1

Sell US$1,000,000 27 March 2013 RMB6.4376: US$1

Sell US$1,000,000 26 April 2013 RMB6.4440: US$1

Sell US$10,000,000 24 May 2013 RMB6.3035: US$1

Sell US$1,000,000 29 May 2013 RMB6.4534: US$1

Sell US$4,000,000 21 June 2013 RMB6.3080: US$1

Sell US$1,000,000 27 June 2013 RMB6.4604: US$1

Sell US$1,000,000 29 July 2013 RMB6.4684: US$1

Sell US$1,000,000 29 August 2013 RMB6.4764: US$1

Sell US$1,000,000 30 September 2013 RMB6.4769: US$1

Sell US$1,000,000 31 October 2013 RMB6.4857: US$1

Sell US$1,000,000 29 November 2013 RMB6.4940: US$1

Sell US$1,000,000 23 December 2013 RMB6.5007: US$1

Sell EURO1,000,000 8 January 2013 US$1.3010: EURO1

Sell EURO1,000,000 5 February 2013 US$1.3010: EURO1

Sell EURO1,000,000 5 March 2013 US$1.3010: EURO1

Buy US$1,000,000 30 January 2013 RMB6.2281: US$1

Buy US$1,000,000 27 February 2013 RMB6.2148: US$1

Buy US$1,000,000 28 March 2013 RMB6.2015: US$1

Buy US$1,000,000 29 April 2013 RMB6.1881: US$1

Buy US$1,000,000 30 May 2013 RMB6.1748: US$1

Buy US$1,000,000 27 June 2013 RMB6.1628: US$1

Buy US$1,000,000 30 July 2013 RMB6.1508: US$1




31. INVENTORIES

31 December

2013

31 December

2012


Raw materials 3,954,144 2,384,193

Work-in-progress 2,295,134 2,936,209

Finished goods 2,524,002 3,072,944

8,773,280 8,393,346

During the year ended 31 December 2013, reversal of allowance of inventories of approximately RMB12,205,000

(2012: RMB10,534,000) has been recognised as the corresponding inventories were either sold or used.




32. TRADE AND OTHER RECEIVABLES

31 December2013

31 December2012


Trade receivables and retentions

Trade and bills receivables 14,158,039 11,331,008Retentions 151,095 115,615

14,309,134 11,446,623

Less: Impairment loss recognised (1,811,755) (1,075,071)

Trade receivables and retentions, net 12,497,379 10,371,552

Loan receivables

Loan receivables (Note e) 124,245 105,000Less: Impairment loss recognised (54,961) (46,448)

Loan receivables, net 69,284 58,552

Prepayments to suppliers and subcontractors, staff advances, deposits and other receivables

Prepayments to suppliers and subcontractors (Note g) 7,584,700 5,294,497Staff advances 78,242 74,675Deposits 149,450 76,797Other receivables 2,007,055 1,287,702

9,819,447 6,733,671Less: Impairment loss recognised (704,455) (431,865)

Prepayments to suppliers and subcontractors, staff advances, deposits and other receivables, net 9,114,992 6,301,806

Total trade and other receivables 21,681,655 16,731,910

Less: Non-current portion Retentions (87,611) (84,132)

Current portion 21,594,044 16,647,778

The Group does not hold any collateral over these balances.




32. TRADE AND OTHER RECEIVABLES (Continued)

(a) Ageing analysis of the Group’s trade receivables and retentions net of impairment loss at the end of

the reporting period presented based on the invoice date at the end of the reporting period, which

approximated the respective revenue recognition dates are as follows:

31 December

2013

31 December

2012


Less than 6 months 10,473,452 8,484,000

6 months to 1 year 1,306,088 1,273,016

1 year to 2 years 520,306 489,127

2 years to 3 years 166,693 109,515

Over 3 years 30,840 15,894

12,497,379 10,371,552

Settlement of trade receivables and retentions generated through engineering and construction services is

made in accordance with the terms specified in the contracts governing the relevant transactions, among

which retentions are generally settled within one to two years after completion of corresponding services.

The Group allows credit period ranging from 30 to 365 days to its trade and construction customers.

(b) As at 31 December 2013, approximately of RMB1,064,336,000 (2012: RMB785,722,000) of the Group’s

trade receivables were past due but not impaired. The ageing analysis of these receivables is as follows:

31 December

2013

31 December

2012


Less than 6 months 35,099 23,399

6 months to 1 year 500,707 341,723

1 year to 2 years 396,667 321,179

2 years to 3 years 125,980 92,068

Over 3 years 5,883 7,353

1,064,336 785,722

Trade receivables that were past due but not impaired were related to a number of individual customers

that have a good track record with the Group. Based on past experience, management believes that no

impairment allowance is necessary in respect of these balances that are still considered fully recoverable.





(c) The carrying amounts of the Group’s trade and other receivables are denominated in the following

currencies:

31 December

2013

31 December

2012


RMB 20,788,830 15,526,694

US$ 280,341 498,003

EUR 94,636 238,994

ALL 76,576 64,350

SAR 217,682 175,550

AZN 61,254 65,299

IQD 121,292 132,263

Others 41,044 30,757

21,681,655 16,731,910

(d) Movement on the impairment loss of trade receivables is as follows:

2013 2012


At 1 January 1,075,071 784,457

Impairment loss recognised 743,363 336,945

Receivables written off as uncollectible (6,679) (46,331)

At 31 December 1,811,755 1,075,071

Included in the impairment loss recognised are individually impaired trade receivables with an aggregate

balance of approximately RMB1,811,755,000 (2012: RMB1,075,071,000). The individually impaired

receivables mainly related to customers that are in unexpected difficult economic situations or of poor

credit history. The factors considered by management in determining the impairment are described in Note 7.





(e) Movement on the impairment loss of loan receivables is as follows:

2013 2012

RMB’000 RMB’000

At 1 January 46,448 41,875


At 31 December 54,961 46,448

Included in the impairment loss recognised are individually impaired loan receivables with an aggregate

balance of approximately RMB54,961,000 (2012: RMB46,448,000) which the Group does not hold any

collateral over these balances. The individually impaired receivables mainly related to debtors that are in

unexpected difficult economic situations or of poor credit history. The factors considered by management

in determining the impairment are described in Note 7.

(f) For the year ended 31 December 2013, the interest bearing loan receivables amounted to approximately

RMB25,400,000 (2012: RMB21,500,000) bear interest ranging from 5.52% to 7.07% (2012: 5.31% to 6.95%).

The remaining loan receivables amounted to approximately RMB98,845,000 (2012: RMB83,500,000) are

non-interest bearing. The interest bearing and non-interest bearing loan receivables are unsecured and

repayable on demand.

(g) Movement on the impairment loss of prepayments to suppliers and subcontractors and other receivables

is as follows:

2013 2012


At 1 January 431,865 104,994


Reversal (25,000) –

Receivables written off as uncollectible (22,498) (20,665)

At 31 December 704,455 431,865

Included in the impairment loss recognised are individually impaired prepayments to suppliers and

subcontractors and other receivables with an aggregate balance of approximately RMB704,455,000 (2012:

RMB431,865,000) which the Group does not hold any collateral over these balances. The individually

impaired receivables mainly related to debtors that are in unexpected difficult economic situations or of

poor credit history and the balances also included the impairment of approximately RMB44,500,000 (2012:

RMB69,500,000) provided for the consideration receivables for disposal of Taian City Electric Power Co.

Ltd. (“Taian Electric”) as stated in Note 50 (ii). The factors considered by management in determining the

impairment are described in Note 7.





(h) During the year ended 31 December 2012, Sinoma Equipment & Engineering Corp., Ltd. (“Sinoma E&E”),

a subsidiary of the Company have entered into certain steel trading agreements with various customers

for which some of these agreements required Sinoma E&E to make prepayments. However, certain of

these customers were unable to settle their outstanding trade receivables or refund the prepayments

made by Sinoma E&E in accordance with the contractual terms of steel trading agreements with

outstanding balances of trade receivables and prepayments to suppliers of approximately RMB946,941,000

and RMB679,796,000 respectively. In order to recover the outstanding receivables and/or prepayments,

Sinoma E&E has taken legal actions against these customers. As at 31 December 2012, the directors of

the Company had assessed the recoverability of each customer individually and recognised an impairment

loss in respect of trade receivable and prepayments to suppliers of approximately RMB186,085,000 and

RMB214,648,000 respectively for the year ended 31 December 2012.

During the year ended 31 December 2013, despite that Sinoma E&E had been successful in the legal

proceedings, no material repayments had been received from those customers. In view of such, Sinoma

E&E had applied to courts in the PRC for freezing the assets of certain customers. Having regard inter

alia to the results of these freezing orders, financial position of the respective customers and value of

assets available for settlement, the directors of the Company recognised further impairment in respect of

trade receivables and prepayments to suppliers of approximately RMB515,398,000 and RMB210,668,000

respectively during the year ended 31 December 2013. The directors of the Company believe that Sinoma

E&E can fully recover the remaining balances.




33. CONTRACT WORK-IN-PROGRESS

31 December

2013

31 December

2012

RMB’000 RMB’000

Contract cost incurred plus recognised profit less recognised losses 45,757,326 50,181,815

Less: Progress billings (45,501,382) (49,911,789)

Contract work-in-progress 255,944 270,026

Analysed for reporting purposes as:

Amounts due from customers for contract work 599,010 562,674

Amounts due to customers for contract work (343,066) (292,648)

255,944 270,026

Contract revenue recognised as turnover 13,890,444 12,453,866

Included in the trade and other receivable are retentions due from customers for contract works of approximately

RMB151,095,000 (2012: RMB115,615,000).

Included in the trade and other payables are advances received from customers for contract works of

approximately RMB7,968,235,000 (2012: RMB6,797,200,000).

When it is probable that total contract costs exceed total contract revenue, the foreseeable loss is recognised as

an expense immediately.

During the year ended 31 December 2013, foreseeable losses on construction contracts of approximately

RMB58,348,000 (2012: RMB55,298,000) have been recognised in the consolidation statement of profit or loss.




34. RESTRICTED BANK BALANCES

The carrying amounts of the Group’s restricted bank balances are denominated in the following currencies:

31 December

2013

31 December

2012


RMB 1,342,101 1,935,293

US$ 165 5,276

EUR 31,862 29,651

Others 5,835 3,869

1,379,963 1,974,089

Restricted bank balances are held in dedicated bank accounts under the name of the Group for the issuance of

performance bonds of approximately RMB9,033,000 (2012: RMB25,950,000) and letter of credits to customers or

bank acceptance notes to suppliers.

As at 31 December 2013, the fixed interest rate on restricted bank balances, with maturities ranging from 6

months to 1 year, ranged from 0.35% to 3.21% (2012: 0.36% to 3.25%) per annum.

35. BANK BALANCES AND CASH

31 December

2013

31 December

2012


Cash at bank and in hand 6,564,717 6,802,636

Bank deposits

– Term deposits 100,210 1,507,461

– Other bank deposits 605,128 925,170

705,338 2,432,631

Cash and cash equivalents 7,270,055 9,235,267




35. BANK BALANCES AND CASH (Continued)

(a) The carrying amounts of the Group’s bank balances and cash are denominated in the following currencies:

31 December

2013

31 December

2012


RMB 5,445,136 7,717,187

US$ 1,333,991 782,669

EUR 217,519 513,440

ZAR 16,353 47,481

VND 6,646 21,510

NGN 10,365 349

SAR 36,394 23,003

XOF 37,872 30,922

MYR 13,855 13,348

AED 25,679 –

IQD 1,628 1,057

ALL 42 40

AZN 1,582 9,293

Others 122,993 74,968

7,270,055 9,235,267

(b) As at 31 December 2013, the fixed interest rate on term deposits with initial terms over three months

ranged from 3.88% to 5.55%(2012: 2.60% to 5.10%) per annum.

As at 31 December 2013, the fixed interest rate on other bank deposits with initial terms ranging from one

month to three months ranged from 2.80% to 3.10% (2012: 2.60% to 2.85%) per annum.

(c) Cash at bank denominated in RMB are deposited with banks in the PRC at the prevailing market rate.

The conversion of these RMB denominated balances into foreign currencies is subject to the rules and

regulations of foreign exchange control promulgated by the PRC government.




36. TRADE AND OTHER PAYABLES

31 December

2013

31 December

2012


Trade payables 15,517,827 13,635,795

Deposits, advances, accruals and other payables

Prepayment from customers 10,725,497 9,002,817

Accrued payroll and welfare 432,333 418,821

Accrued social security costs 279,706 276,594

Other taxes 227,943 329,198

Accrued expenses 293,479 288,585

Deposits payable 173,174 170,340

Dividends payable to non-controlling interests

by subsidiaries 148,196 159,829

Other payables 659,017 705,760

12,939,345 11,351,944

Total trade and other payables 28,457,172 24,987,739

Less: Non-current portion:

Accrued payroll and welfare (4,034) (4,645)

Current portion 28,453,138 24,983,094




36. TRADE AND OTHER PAYABLES (Continued)

(a) Ageing analysis of trade payables at the end of the reporting period presented based on the invoice date

are as follows:

31 December

2013

31 December

2012


Within 6 months 11,948,717 10,767,114

6 months to 1 year 2,668,255 2,159,367

1 year to 2 years 638,196 512,732

2 years to 3 years 157,272 96,333

Over 3 years 105,387 100,249

15,517,827 13,635,795

The credit period on purchases of goods ranges from 90 days to 180 days. The Group has financial risk

management policies in the place to ensure that all payables are settled within the credit timeframe.

(b) The carrying amounts of the Group’s trade and other payables are denominated in the following currencies:

31 December

2013

31 December

2012


RMB 26,227,112 23,258,840

US$ 1,693,511 1,436,534

EUR 531,516 289,516

HK$ 5,033 2,849

28,457,172 24,987,739

(c) Non-current portion of accrued payroll and welfare represents the portion of accrued employee housing

allowances, payable to employees over their years of service to the Group, expected to be settled over

one year from the end of the reporting period.




37. SHORT-TERM FINANCING BILLS

31 December

2013

31 December

2012

RMB’000 RMB’000

Short-term financing bills 2,900,000 400,000

On 24 July 2012, Tianshan Cement issued one-year short-term financing bills of face value at RMB400,000,000 in

the PRC inter-bank bond market. The short-term financing bills bear a fixed interest rate of 4.29% per annum and

the principal together with the interest thereon is payable on maturity of the bills.

On 23 January 2013, the Company issued one-year short-term financing bills of face value at RMB1,000,000,000

in the PRC inter-bank bond market. The short-term financing bills bear a fixed interest rate of 4.24% per annum

and the principal together with the interest thereon is payable on maturity of the bills.

On 21 March, 23 May and 10 October 2013, Tianshan Cement issued three one-year short-term financing bills of

face value at RMB400,000,000, RMB200,000,000 and RMB400,000,000 respectively in the PRC inter-bank bond

market. The short-term financing bills bear a fixed interest rate of 4.55%, 4.44% and 5.78% respectively per

annum and the principal together with the interest thereon is payable on maturity of the bills.

On 23 April 2013, the Sinoma Cement Co., Ltd. (“Sinoma Cement”) issued one-year short-term financing bills

of face value at RMB300,000,000 in the PRC inter-bank bond market. The short-term financing bills bear a fixed

interest rate of 4.50% per annum and the principal together with the interest thereon is payable on maturity of

the bills.

On 14 May 2013, the Sinoma Science & Technology Co., Ltd. (“Sinoma Science & Technology”) issued one-year

short-term financing bills of face value at RMB600,000,000 in the PRC inter-bank bond market. The short-term

financing bills bear a fixed interest rate of 4.30% per annum and the principal together with the interest thereon

is payable on maturity of the bills.




38. BORROWINGS31 December

201331 December

2012RMB’000 RMB’000

(Restated)

Bank borrowing – Secured 2,036,357 1,824,899 – Unsecured 20,183,309 21,007,135

22,219,666 22,832,034

Other borrowing – Secured – – – Unsecured 1,969,581 2,198,012

1,969,581 2,198,012

Total borrowing 24,189,247 25,030,046

Non-currentLong-term bank borrowings – Secured (Note a) 826,200 917,590 – Unsecured 6,160,278 7,218,061

6,986,478 8,135,651

Other borrowings – Secured (Note a) – – – Unsecured 944,948 1,144,948

944,948 1,144,948

Total non-current borrowings 7,931,426 9,280,599

CurrentCurrent portion of long-term bank borrowings – Secured (Note a) 267,740 238,879 – Unsecured 1,278,334 2,478,211

1,546,074 2,717,090

Short-term bank borrowings – Secured (Note a) 1,091,497 668,430 – Unsecured 12,595,617 11,310,863

13,687,114 11,979,293

Other borrowings – Secured (Note a) – – – Unsecured 1,024,633 1,053,064

1,024,633 1,053,064

Total current borrowings 16,257,821 15,749,447

Total borrowings 24,189,247 25,030,046




38. BORROWINGS (Continued)

Notes:

(a) Secured borrowings of the Group as at 31 December 2013 and 2012 were secured by the Group’s property, plant and

equipment (Note 21) and prepaid lease payments (Note 22).

(b) The exposure of borrowings to interest rate changes is as follows:

31 December

2013

31 December

2012

RMB’000 RMB’000

(Restated)

Fixed-rate borrowings 9,600,712 9,760,462

Variable-rate borrowings 14,588,535 15,269,584

24,189,247 25,030,046

(c) The maturities of total borrowings are set out as follows:

31 December

2013

31 December

2012

RMB’000 RMB’000

(Restated)

Within 1 year 16,257,821 15,749,447

1 year to 2 years 3,304,572 3,946,945

2 years to 5 years 4,130,715 4,646,501

Wholly repayable within 5 years 23,693,108 24,342,893

Over 5 years 496,139 687,153

24,189,247 25,030,046

(d) The carrying amounts of the Group’s borrowings are denominated in the following currencies:

31 December

2013

31 December

2012

RMB’000 RMB’000

(Restated)

RMB 23,932,501 24,883,594

US$ 256,746 146,452

24,189,247 25,030,046




38. BORROWINGS (Continued)

Notes: (Continued)

(e) Certain borrowings of the Group are guaranteed by other state-owned enterprises and independent third parties. The

amounts of the guarantees provided by other state-owned enterprises and independent third parties to the Group at the

end of the reporting period are as follows:

31 December

2013

31 December

2012

RMB’000 RMB’000

(Restated)

Guarantees provided by:

– Other state-owned enterprises 20,000 20,000

– Independent third parties 538,460 517,300

558,460 537,300

(f) The weighted average effective interest rates (per annum) at the end of the respective reporting periods are as follows:

31 December

2013

31 December

2012

RMB’000 RMB’000

Bank borrowings

– RMB 6.51% 6.39%

– US$ 3.93% 3.73%

Other borrowings

– RMB 5.97% 5.80%

(g) The undrawn borrowing facilities are as follows:

31 December

2013

31 December

2012

RMB’000 RMB’000

Floating rate

– Expiring within 1 year 12,379,530 11,883,820

– Expiring beyond 1 year 9,789,285 10,166,833

Fixed rate

– Expiring within 1 year 7,671,894 9,037,202

– Expiring beyond 1 year 285,000 85,000

30,125,709 31,172,855




39. EARLY RETIREMENT AND SUPPLEMENTAL BENEFIT OBLIGATIONS

The Group operates unfunded defined benefit plan for qualifying former employees. The Group paid supplemental

pension subsidies or pension contributions to its retired employees in the PRC who retired prior to 31 December

2006. In addition, the Group is committed to make periodic benefits payments to certain former employees who

were terminated or early retired in accordance with various rationalisation programmes adopted by the Group prior

to 31 December 2006. The Group ceased to pay the supplemental pension subsidies and other post-employment

medical benefits to its retired employees and early retired employees in China who leave the Group after 31

December 2006. The plan is administered by the Group and contributed from the Group in accordance with an

independent actuary’s recommendation based on annual actuarial valuations. Under the plan, the employees are

entitled to retirement benefits varying between 45% and 65% of final salary on attainment of a retirement age of

55-60.

The defined benefit plan expose the Group to actuarial risks, such as interest rate risk, longevity risk and salary

risk.

Interest rate risk A decrease in the bond interest rate will increase the plan liability.

Longevity risk The present value of the defined benefit plan liability is calculated by reference

to the best estimate of the mortality of plan participants both during and after

their employment. An increase in the life expectancy of the plan participants

will increase the plan’s liability.

Salary risk The present value of the defined benefit plan liability is calculated by reference

to the future salaries of plan participants. As such, an increase in the salary of

the plan participants will increase the plan’s liability.

No other post-retirement benefits are provided to these employees.




39. EARLY RETIREMENT AND SUPPLEMENTAL BENEFIT OBLIGATIONS (Continued)

Amounts recognised in profit or loss or other comprehensive income in respect of the defined benefit plan are as

follows:

2013 2012


Past service cost (9,060) (20,460)

Routine benefit payment 50,897 49,099

Net interest on obligation (11,044) (12,064)

Total amounts recognised in profit or loss 30,793 16,575

Remeasurement of defined benefit obligation:

Actuarial losses recognised in the year (38,762) (6,103)

Adjustments for restrictions on the defined benefit asset 22,567 –

Total amounts recognised in other comprehensive income (16,195) (6,103)

Total defined benefit costs 14,598 10,472

Of the amounts recognised in profit or loss, amounted to approximately RMB20,104,000 (2012: RMB32,524,000)

has been included in administrative expenses.

The amount included in the consolidated statement of financial position arising from the Group’s obligation in

respect of the defined benefit plan is as follows:

2013 2012


Present value of unfunded defined benefit obligation 317,268 331,866

Less: current portion (50,897) (49,114)

Non-current portion 266,371 282,752





Movements in the present value of the funded defined benefit obligations in the current year were as follows:

2013 2012


At 1 January 331,866 342,338

Interest cost 11,044 12,064

Remeasurements:

Adjustments for restrictions on the defined benefit asset (22,567) –

Actuarial losses recognised in the year 38,762 6,103

Past service cost, including losses on curtailments 9,060 20,460

Benefit paid (50,897) (49,099)

At 31 December 317,268 331,866

The principal assumptions used for the purposes of the actuarial valuation were as follow:

Valuation at

2013 2012


Discount rate 4.7% 4.4%

Benefit increase rates 6% 5%

Mortality for current early retiree

Male 0.26% 0.26%

Female 0.14% 0.14%

Mortality for current retiree

Male 1.19% 0.70%

Female 0.75% 0.43%





The assumptions on mortality are set based on actuarial advice in accordance with published statistics and

experience in each territory.

The sensitivity analyses below have been determined based on reasonably possible changes of the respective

assumptions occurring at the end of the reporting period.

Change in assumption

Impact on defined benefit

obligation 31/12/2013

RMB’000

Discount rate increase/decrease by 0.5% decrease/increase by 13,106

Benefits increase rates increase/decrease by 0.5% increase/decrease by 13,357

Mortality increase/decrease by 1% increase/decrease by 855

The above sensitivity analyses are based on a change in an assumption while holding all other assumptions

constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated.

When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same

method (present value of the defined benefit obligation calculated with the projected unit credit method at

the end of the reporting period) has been applied as when calculating the liability arising from defined benefit

obligation.

The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the

previous period.

The weighted average duration of the defined benefit obligation is 58 years.

The most recent actuarial valuations of plan and the present value of the defined benefit obligation were

carried out at 24 February 2014 by Mr. Alex Tschai, Consulting Director, Principal Actuary of Mercer Investment

Consulting Inc and is a Fellow of the Institute of Actuaries. The present value of the defined benefit obligation,

related service cost were measured using the Projected Unit Credit Cost method.




40. CASH-SETTLED SHARE-BASED PAYMENTS

The Group implemented a share appreciation rights scheme to motivate and award the senior management team and other key members of the Company. Under this share appreciation rights scheme, share appreciation rights are granted in units representing one H share. No share will be issued under the share appreciation rights scheme. Upon exercise of the share appreciation rights, a recipient will receive, subject to any applicable withholding tax, a cash payment in RMB, translated from the Hong Kong dollars amount equal to the product of the number of share appreciation rights exercised and the difference between the exercise price and market price of the Company’s H shares at the date of exercise based on the applicable exchange rate between RMB and Hong Kong dollars at the date of the exercise. The Company recognises compensation expense of the share appreciation rights over the applicable vesting period.

The share appreciation rights scheme was approved at the second extraordinary general meeting held on 22 October 2010. On 13 December 2010, 4,130,000 units of the share appreciation rights scheme with a vesting period of two years were granted to sixteen senior officers, including five directors and eleven senior management members, at an exercise price of RMB5.17 per unit. On 22 December 2010, Mr. Zhou Yuxian, executive director, resigned and his related right of acquiring 300,000 units of the share appreciation rights were voided under the share appreciation rights scheme. Under the terms of this grant, all share appreciation rights had a contractual life of seven years from the date of grant. A recipient of share appreciation rights may not exercise the rights in the first twenty four months after the date of grant. As at each of the second, third and fourth anniversary of the date of grant, the total number of share appreciation rights exercisable may not in aggregate exceed one-third, two-third and 100%, respectively, of the total share appreciation rights granted to such person. The total amounts paid in cash as a result of the Company’s market price being higher that the exercise price of the share appreciation rights shall not exceed 40% of the salaries level of those grantees accessed at the date of grant. The share appreciation rights which have not been exercised after the expiration of the term of the scheme shall lapse.

On 2 September 2012, Mr. Tan Zhongming, executive director of the Company was deceased and his related

right of acquiring 350,000 units of the share appreciation rights were voided under the share appreciation rights

scheme. During the year ended 31 December 2013, no share appreciation rights granted was exercised or

expired. As at 31 December 2013, the expiry date of the outstanding share appreciation rights is four years.

For the year ended 31 December 2013, the Group has reversed expenses of approximately RMB871,000

(2012: reversed expenses of approximately RMB459,000) and with liabilities balances of RMB113,000 (2012:

approximately RMB984,000) related to the share appreciation rights. The fair value of share appreciation rights is

determined using the Black-Scholes pricing model with expected volatility of 50% (2012: 50%), risk free rate of

4.46% (2012: 3.30%) and dividend yield of 1% (2012: 1%). The share appreciation rights liability was recorded in

accrued payroll and welfare in trade and other payables and administrative expenses.




41. PROVISIONS

2013 2012

RMB’000 RMB’000

Analysed for reporting purposes:

Non-current liabilities 56,460 44,788

Current liabilities 25,060 48,724

81,520 93,512

Provision for

litigation Warranties Total

RMB’000 RMB’000 RMB’000(Note i) (Note ii)

At 1 January 2012 27,780 58,492 86,272

Additional provision recognised – 28,710 28,710

Utilised during the year – (21,470) (21,470)

At 31 December 2012 and 1 January 2013 27,780 65,732 93,512

Additional provision recognised – 38,331 38,331

Reversal (27,780) – (27,780)

Utilised during the year – (22,543) (22,543)

At 31 December 2013 – 81,520 81,520

Notes:

(i) Provision for litigation is made based on management’s best estimates and judgement, as described in Note 7 above.

During the year ended 31 December 2013, the Company has received final judgement from the court and confirmed

that the Company was not liable for the case and therefore, the management of the Company made full reversal of such

provision made in previous year.

(ii) The provision for warranty claims represents the present value of the directors’ best estimate of the future outflow

of economic benefits that will be required under the Groups’ obligations for warranties under the sale contracts. The

estimate has been made on the basis of historical warranty trends and may vary as a result of new materials, altered

manufacturing processes or other events affecting product quality.




42. CORPORATE BONDS

2013 2012

RMB’000 RMB’000

Corporate bonds, at amortised cost 2,492,782 2,490,239

On 31 July 2009, the Company issued seven-year corporate bonds of face value of RMB2,500,000,000 in the

PRC capital market. The corporate bonds bear a fixed interest rate of 5.40% per annum and the interest is paid

annually.

The corporate bonds are denominated in RMB. The effective interest rate of the corporate bonds is 5.52% per

annum.

43. MEDIUM-TERM NOTES

2013 2012

RMB’000 RMB’000

Medium-term notes, at amortised cost 5,755,339 5,253,610

The medium-term notes are denominated in RMB and the details are as follow:

Date of issue Principal Term

Contractual

interest rate

Interest

payment

Effective

interest rate

RMB’000

10 March 2010 1,700,000 5 years 4.48% per annum Annually 4.48%

21 April 2011 660,000 5 years 6.16% per annum Annually 6.41%

20 October 2011 500,000 5 years 7.00% per annum Annually 7.00%

25 October 2011 700,000 5 years 7.99% per annum Annually 7.99%

24 November 2011 800,000 5 years 5.83% per annum Annually 5.89%

14 August 2012 900,000 5 years 5.61% per annum Annually 5.63%

7 June 2013 500,000 3 years 5.04% per annum Annually 5.04%




44. DEFERRED INCOME

Government

grants

relating to

research and

development

expenditure

Government

grants

relating

to property,

plant and

equipment

Government

grants

relating

to land

use rights Total

RMB’000 RMB’000 RMB’000 RMB’000

At 1 January 2012 113,231 218,918 114,333 446,482

Additions 290,293 89,223 68,390 447,906

Utilised/amortised during the year (108,719) (79,072) (17,694) (205,485)

At 31 December 2012 and 1 January 2013 294,805 229,069 165,029 688,903

Additions 146,445 118,766 23,033 288,244

Utilised/amortised during the year (110,597) (79,560) (22,657) (212,814)

At 31 December 2013 330,653 268,275 165,405 764,333

During the year ended 31 December 2013, the Group received government grants of approximately

RMB146,445,000 (2012: RMB290,293,000) towards the research and development expenditure. The amounts

have been treated as deferred income and are recognised as revenue over the periods necessary to match

them with the costs for which they are intended to compensate, on a systematic basis. This policy has resulted

in a credit to income in the current year of approximately RMB110,597,000 (2012: RMB108,719,000). As at 31

December 2013, an amount of approximately RMB330,653,000 (2012: RMB294,805,000) remains unutilised.

During the year ended 31 December 2013, the Group received government grants of approximately

RMB141,799,000 (2012: RMB157,613,000) towards the cost of construction of property, plant and equipment

and acquisition of land use rights. The amounts have been treated as deferred income and transferred to income

over the useful lives of the related assets. This policy has resulted in a credit to income in the current year of

approximately RMB102,217,000 (2012: RMB96,766,000). As at 31 December 2013, an amount of approximately

RMB433,680,000 (2012: RMB394,098,000) remains unamortised.




45. DEFERRED INCOME TAX

The movements in deferred income tax assets and liabilities during the year are as follows:

(a) Deferred income tax assets

Provision

for

impairment

of assets

Assets

revaluation

surplus

during the

Reorganisation Tax losses

Deferred

income

arising from

government

grants

Unrealised

profit on

inter-company

transactions

Provision

for early

retirement

and

supplemental

benefit

obligations Others Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

At 1 January 2012 (restated) 246,414 6,432 13,714 18,477 165,368 59,668 83,893 593,966

Acquisition of subsidiaries 1,750 – – – – – – 1,750

Eliminated on disposal

of a subsidiary (9,431) – – – – – – (9,431)

Credited to other

comprehensive income – – – – – 1,831 – 1,831

Credited (charged) to the

consolidated statement of

profit or loss 59,220 (254) 149 10,461 57,949 (11,265) 4,524 120,784

Effect of changes in tax rates (4,463) – – – – – – (4,463)


1 January 2013 (restated) 293,490 6,178 13,863 28,938 223,317 50,234 88,417 704,437

Acquisition of subsidiaries 952 – – – – – – 952

Credited to other

comprehensive income – – – – – 4,425 – 4,425

Credited (charged) to the

consolidated statement of

profit or loss 71,136 (1,026) 612 8,771 47,568 (5,761) 1,083 122,383

At 31 December 2013 365,578 5,152 14,475 37,709 270,885 48,898 89,500 832,197




45. DEFERRED INCOME TAX (Continued)

(b) Deferred income tax liabilities

Assets

revaluation

surplus in

business

combinations

Borrowings

reassessed

in debt

restructurings

Available-

for-sale

financial

assets Total

RMB’000 RMB’000 RMB’000 RMB’000

At 1 January 2012 (restated) 277,758 2,642 427,458 707,858

Attributable to acquisition of subsidiaries 39,078 – – 39,078

Credited to other comprehensive income – – (16,245) (16,245)

Credited to consolidated statement of profit

or loss (33,188) (304) – (33,492)


1 January 2013 (restated) 283,648 2,338 411,213 697,199

Attributable to acquisition of subsidiaries 18,378 – – 18,378

Credited to other comprehensive income – – (76,300) (76,300)

Credited to consolidated statement of profit

or loss (30,099) (336) – (30,435)

At 31 December 2013 271,927 2,002 334,913 608,842




45. DEFERRED INCOME TAX (Continued)

(c) Deferred income tax assets are recognised for tax loss carry-forwards to the extent that the realisation of

the related tax benefit through the future taxable profits is probable. As at 31 December 2013, a deferred

tax asset has been recognised in respect of approximately RMB89,755,000 (2012: RMB85,977,000) of

such losses. No deferred tax assets has been recognised in respect of the remaining tax losses amounting

to approximately RMB1,264,372 (2012: RMB1,067,075,000), as management believes it is more likely than

not that such tax losses would not be realised before they expire. The expiry of the tax losses for which

no deferred income tax assets were recognised are analysed as follows:

2013 2012

RMB’000 RMB’000

Within 1 year 63,325 50,011

Between 1 to 2 years 210,412 47,625

Between 2 to 3 years 416,245 210,412

Between 3 to 4 years 342,782 416,245

Between 4 to 5 years 231,608 342,782

1,264,372 1,067,075

46. SHARE CAPITAL

Unlisted

domestic shares

Unlisted

foreign shares H Shares Total

Number

of shares Amount

Number

of shares Amount

Number

of shares Amount

Number

of shares Amount

’000 RMB’000 ’000 RMB’000 ’000 RMB’000 ’000 RMB’000

Registered, issued and fully paid:

1 January 2012,

31 December 2012,

1 January 2013 and

31 December 2013 2,276,523 2,276,523 130,793 130,793 1,164,148 1,164,148 3,571,464 3,571,464




47. RESERVES

Safety fund

2013 2012

RMB’000 RMB’000

At 1 January 114,381 86,666


Utilisation of safety fund (57,911) (49,951)

At 31 December 154,015 114,381

Foreign exchange reserve

2013 2012

RMB’000 RMB’000

At 1 January (20,208) (12,523)

Exchange differences arising on translation (26,661) (7,685)

At 31 December (46,869) (20,208)

Investment revaluation reserve

2013 2012

RMB’000 RMB’000

At 1 January 1,205,026 1,255,685

Loss on fair value changes of available-for-sale financial assets (307,290) (68,160)

Income tax relating to fair value changes of available-for-sale financial assets 77,114 17,501

At 31 December 974,850 1,205,026




48. BUSINESS COMBINATIONS OTHER THAN COMMON CONTROL COMBINATIONS

(a) Business combinations for the year ended 31 December 2013

(i) Zhangye Julong

On 1 April 2013, the Group acquired 26% equity interests in Zhangye Julong from independent third party for an aggregate cash consideration of RMB60,000,000. Zhangye Julong is principally engaged in the production of clinker and cement and was acquired so as to continue the expansion of the Group’s cement operation. This acquisition has been accounted for using acquisition method.

The Group had signed an agreement with another shareholder of Zhangye Julong, Gansu Heihe Hydropower Development Company Limited (“Gansu Heihe”), which hold 26% equity interests in Zhangye Julong. Pursuant to the agreement, Gansu Heihe agreed to act in consent with the Group and the Group had obtained more than half of the voting power in the board of directors of Zhangye Julong and therefore, Zhangye Julong is regarded as a non-wholly owned subsidiary of the Group.

Consideration transferred

RMB’000

Cash 60,000

Acquisition-related costs were borne by the vendor and have been excluded from the consideration transferred.

Assets acquired and liabilities recognised at the date of acquisition are as follows:

RMB’000

Property, plant and equipment 302,587Prepaid lease payments 7,790Deferred income tax assets 949Inventories 62,824Trade and other receivables 162,400Bank balances and cash 6,264Trade and other payables (195,409)Income tax liabilities 5,390Borrowings (180,750)Dividend payable (37,131)Deferred income tax liabilities (4,198)

130,716

The fair value of trade and other receivables at the date of acquisition amounted to approximately RMB162,400,000. The gross contractual amounts of those trade and other receivables acquired amounted to approximately RMB162,400,000 at the date of acquisition. No estimated uncollectible contractual cash flows were expected at the acquisition date.





(Continued)

(a) Business combinations for the year ended 31 December 2013 (Continued)

(i) Zhangye Julong (Continued)

Goodwill arising on acquisition:

RMB’000

Consideration transferred 60,000

Plus: non-controlling interest (74% in Zhangye Julong) 96,730

Less: net assets acquired (130,716)

Goodwill arising on acquisition 26,014

The non-controlling interest in Zhangye Julong recognised at the acquisition date was measured by

reference to the proportionate share of recognised amounts of net assets of Zhangye Julong and

amounted to approximately RMB96,730,000.

Goodwill arose in the acquisition of Zhangye Julong because the consideration paid for the

acquisition effectively included amounts in relation to the benefit of expected synergies, revenue

growth, future market development and the assembled workforce of Zhangye Julong. These

benefits are not recognised separately from goodwill because they do not meet the recognition

criteria for identifiable intangible assets.

None of the goodwill arising on this acquisition is expected to be deductible for tax purpose.

Net cash outflow on acquisition of Zhangye Julong

RMB’000

Cash consideration paid (60,000)

Cash and cash equivalents acquired 6,264

(53,736)

Impact of acquisition on the results of the Group

Included in the profit for the year is approximately RMB52,439,000 attributable to the

additional business generated by Zhangye Julong. Turnover for the year includes approximately

RMB289,185,000 is generated from Zhangye Julong.





(Continued)


(i) Zhangye Julong (Continued)

Had the acquisition been completed on 1 January 2013, total turnover of the Group for the year

would have been RMB52,100,406,000 and profit for the year would have been RMB1,457,242,000.

The pro forma information is for illustrative purposes only and is not necessarily an indication

of turnover and results of operations of the Group that actually would have been achieved had

the acquisition been completed on 1 January 2013, nor is it intended to be a projection of future

results.

In determining the ‘pro-forma’ turnover and profit of the Group had Zhangye Julong been acquired

at the beginning of the current year, the directors of the Company have:

• calculated depreciation of property, plant and equipment acquired on the basis of the fair

values arising in the initial accounting for the business combination rather than the carrying

amounts recognised in the preacquisition financial statements; and

• determined borrowing costs based on the funding levels, credit ratings and debt/equity

position of the Group after the business combination.

(ii) LNV Technology

On 1 April 2013, the Group acquired 68% equity interests in LNV Technology from an

independent third parties for an aggregate cash consideration of approximately RMB149,164,000

(INR1,300,139,000). LNV Technology is principally engaged in offering engineering solutions and

was acquired so as to continue the expansion of the cement equipment and engineering services in

India. This acquisition has been accounted for using acquisition method.


RMB’000

Cash 149,164

Acquisition-related costs were insignificant and have been excluded from the consideration

transferred and have been recognised as an expense for the year ended 31 December 2013, within

the ‘administrative expenses’ in the consolidated statement of profit or loss.





(Continued)


(ii) LNV Technology (Continued)


RMB’000

Property, plant and equipment 43,568

Intangible assets 10,274

Other non-current assets 20,321

Inventories 4,172

Trade and other receivables 68,905

Other current assets 18,766

Bank balances and cash 44,863

Trade and other payables (75,042)

Deferred income tax liabilities (1,416)

134,411

The fair value of trade and other receivables at the date of acquisition amounted to approximately

RMB68,905,000. The gross contractual amounts of those trade and other receivables acquired

amounted to approximately RMB68,905,000 at the date of acquisition. No estimated uncollectible

contractual cash flows were expected at the acquisition date.


RMB’000


Plus: non-controlling interests (32% in LNV Technology) 43,012



The non-controlling interest in LNV Technology recognised at the acquisition date was measured by reference to the proportionate share of recognised amounts of net assets of LNV Technology and amounted to approximately RMB43,012,000.

Goodwill arose in the acquisition of LNV Technology because the consideration paid for the acquisition effectively included amounts in relation to the benefit of expected synergies, revenue growth, future market development and the assembled workforce of LNV Technology. These benefits are not recognised separately from goodwill because they do not meet the recognition criteria for identifiable intangible assets.






(Continued)


(ii) LNV Technology (Continued)

Net cash outflow on acquisition of LNV Technology

RMB’000



(104,301)


Included in the profit for the year is approximately RMB4,668,000 attributable to the additional

business generated by LNV Technology. Turnover for the year includes approximately

RMB62,721,000 generated from LNV Technology.

Had the acquisition been completed on 1 January 2013, total turnover of the Group for the year

would have been approximately RMB52,130,413,000, and profit for the year would have been

approximately RMB1,473,952,000. The pro forma information is for illustrative purposes only and is

not necessarily an indication of turnover and results of operations of the Group that actually would

have been achieved had the acquisition been completed on 1 January 2013, nor is it intended to be

a projection of future results.

In determining the “pro-forma” turnover and profit of the Group had LNV Technology been acquired

at the beginning of the current year, the directors of the Company have:

• calculated depreciation of property, plant and equipment acquired on the basis of the fair

values arising in the initial accounting for the business combination rather than the carrying

amounts recognised in the preacquisition financial statements; and







(Continued)


(iii) Wuhai Xishui

On 21 June 2013, the Group acquired additional 55% equity interest in Wuhai Xishui held by Xishui

Strong Year Co., Ltd Inner Mongolia (“XSGF”) for a consideration of RMB233,139,000. Wuhai Xishui

was currently owned by Ningxia Building Materials and XSGF as to 45% and 55%, respectively.

Upon completion of the acquisition, Wuhai Xishui has become a wholly-owned subsidiary of Ningxia

Building Materials and an indirect subsidiary of the Company.Wuhai Xishui is principally engaged

in manufacturing and sales of cement and cement clinker and was acquired so as to continue

the expansion of the Group’s cement operation. This acquisition has been accounted for using

acquisition method.


RMB’000

Cash 233,139

Acquisition-related costs were borne by the vendor and have been excluded from the consideration

transferred.


RMB’000


Prepaid lease payments 8,390

Mining rights 23,851

Inventories 74,392





Income tax liabilities (3,583)

Borrowings (14,000)

Dividend payable (19,376)

419,311









(Continued)


(iii) Wuhai Xishui (Continued)


RMB’000


Acquisition date fair value of 45% previous held interest 188,690



Goodwill arose in the acquisition of Wuhai Xishui because the consideration paid for the acquisition

effectively included amounts in relation to the benefit of expected synergies, revenue growth,

future market development and the assembled workforce of Wuhai Xishui. These benefits are

not recognised separately from goodwill because they do not meet the recognition criteria for

identifiable intangible assets.


Net cash outflow on acquisition of Wuhai Xishui

RMB’000



(232,043)


Included in the profit for the year is approximately RMB33,517,000 loss for the year attributable to

the additional business generated by Wuhai Xishui. Turnover for the year includes approximately

RMB151,191,000 generated from Wuhai Xishui.

Had the acquisition been completed on 1 January 2013, total revenue of the Group for the year

would have been approximately RMB52,207,649,000 and profit for the year would have been

approximately RMB1,409,196,000. The pro-forma information is for illustrative purposes only and is

not necessarily an indication of turnover and results of operations of the Group that actually would

have been achieved had the acquisition been completed on 1 January 2013, nor is it intended to be

a projection of future results.





(Continued)


(iii) Wuhai Xishui (Continued)

In determining the “pro-forma” turnover and profit of the Group had Wuhai Xishui been acquired at the beginning of the current year, the directors of the Company have:

• calculated depreciation of property, plant and equipment acquired on the basis of the fairvalues arising in the initial accounting for the business combination rather than the carrying amounts recognised in the preacquisition financial statements; and

• determined borrowing costs based on the funding levels, credit ratings and debt/equityposition of the Group after the business combination.

(iv) Runji CementOn 13 September 2013, the Group acquired 100% equity interests in Runji Cement from independent third parties for an aggregate cash consideration of RMB265,595,000. Runji Cement is principally engaged in the production and sale of clinker and cement and was acquired so as to continue the expansion of the Group’s cement operation. This acquisition has been accounted for using acquisition method.


RMB’000

Cash 265,595

Acquisition-related costs were borne by the vendor and have been excluded from the consideration transferred.


RMB’000

Property, plant and equipment 291,458Prepaid lease payments 47,723Mining rights 4,980Other non-current assets 10,594Deferred income tax assets 3Inventories 18,848Trade and other receivables 46,612Other current assets 49Bank balances and cash 4,948Trade and other payables (150,818)Income tax liabilities (3,470)Dividend payable (7,639)Deferred income tax liabilities (12,764)

250,524





(Continued)


(iv) Runji Cement (Continued)






RMB’000




Goodwill arose in the acquisition of Runji Cement because the consideration paid for the acquisition


future market development and the assembled workforce of Runji Cement. These benefits are




Net cash outflow on acquisition of Runji Cement

RMB’000



(260,647)





(Continued)


(iv) Runji Cement (Continued)


Included in the profit for the year is approximately RMB3,435,000 loss for the year attributable to the additional business generated by Runji Cement. Turnover for the year includes approximately RMB46,828,000 generated from Runji Cement.

Had the acquisition been completed on 1 January 2013, total revenue of the Group for the year would have been approximately RMB52,265,161,000 and profit for the year would have been approximately RMB1,472,817,000. The pro forma information is for illustrative purposes only and is not necessarily an indication of turnover and results of operations of the Group that actually would have been achieved had the acquisition been completed on 1 January 2013, nor is it intended to be a projection of future results.

In determining the “pro-forma” turnover and profit of the Group had Runji Cement been acquired at the beginning of the current year, the directors of the Company have:

• calculated depreciation of property, plant and equipment acquired on the basis of the fairvalues arising in the initial accounting for the business combination rather than the carrying amounts recognised in the preacquisition financial statements; and

• determined borrowing costs based on the funding levels, credit ratings and debt/equityposition of the Group after the business combination.

(b) Business combinations for the year ended 31 December 2012

(i) Pingluo GoldenOn 1 January 2012, the Group acquired 100% equity interests in Pingluo Golden from independent third parties for an aggregate consideration of approximately RMB56,305,000. Pingluo Golden is principally engaged in the production and sales of commercial concrete and was acquired so as to expand the production of commercial concrete of the Group. This acquisition has been accounted for using acquisition method.


RMB’000

Cash 52,044Other payables 4,261

56,305

Acquisition-related costs were insignificant and have been excluded from the consideration transferred and have been recognised as expense in the current year, within the “administrative expenses” in the consolidated statement of profit or loss.





(Continued)

(b) Business combinations for the year ended 31 December 2012 (Continued)

(i) Pingluo Golden (Continued)


RMB’000



Inventories 1,242


Bank balances and cash 2

Income tax receivables 197


55,961






RMB’000



Goodwill arising on acquisition 344

Goodwill arose in the acquisition of Pingluo Golden because the consideration paid for the

acquisition effectively included amounts in relation to the benefit of expected synergies, revenue

growth, future market development and the assembled workforce of Pingluo Golden. These

benefits are not recognised separately from goodwill because they do not meet the recognition

criteria for identifiable intangible assets.






(Continued)


(i) Pingluo Golden (Continued)

Net cash outflow on acquisition of Pingluo Golden

RMB’000


Cash and cash equivalents acquired 2

(52,042)



business generated by Pingluo Golden. Turnover for the year includes approximately

RMB88,436,000 generated from Pingluo Golden.

(ii) Xiahe Anduo

On 1 March 2012, the Group acquired 65% equity interests in Xiahe Anduo from an independent

third party for an aggregate cash consideration of approximately RMB340,725,000. Xiahe Anduo is

principally engaged in the production and the selling of cement and was acquired so as to continue

the expansion of the Group’s cement operation. This acquisition has been accounted for using

acquisition method.


RMB’000

Cash 324,113

Other payables 16,612

340,725

Acquisition-related costs were borne by the vendor and have been excluded from the consideration

transferred.





(Continued)


(ii) Xiahe Anduo (Continued)


RMB’000



Mining right 15,524

Inventories 57,099



Deferred income tax assets 1,750

Other current assets 45


Dividend payable (50,757)


Borrowings (80,000)

Deferred income tax liabilities (39,078)

300,670






RMB’000


Plus: non-controlling interests (35% in Xiahe Anduo) 105,235



The non-controlling interest in Xiahe Anduo recognised at the acquisition date was measured by

reference to the proportionate share of recognised amounts of net assets of Xiahe Anduo and

amounted to approximately RMB105,235,000.





(Continued)


(ii) Xiahe Anduo (Continued)

Goodwill arose in the acquisition of Xiahe Anduo because the consideration paid for the acquisition


future market development and the assembled workforce of Xiahe Anduo. These benefits are




Net cash outflow on acquisition of Xiahe Anduo

RMB’000



(302,018)

Deposit paid for acquisition in previous years 101,400

(200,618)



business generated by Xiahe Anduo. Turnover for the year includes approximately RMB286,181,000

generated from Xiahe Anduo.

Had the acquisition of Xiahe Anduo been completed on 1 January 2012, the total amount of

turnover of the Group for the year would have been approximately RMB46,277,346,000, and the

amount of the profit for the year would have been approximately RMB1,562,786,000. The pro-forma

information is for illustrative purposes only and is not necessarily an indication of turnover and

results of operations of the Group that actually would have been achieved had the acquisition been

completed on 1 January 2012, nor is it intended to be a projection of future results.

In determining the ‘pro-forma’ turnover and profit of the Group had Xiahe Anduo been acquired at

the beginning of the current year, the directors have:

• calculated depreciation and amortisation of plant and equipment based on the recognised

amounts of plant and equipment at the date of the acquisition.







(Continued)


(iii) Sinoma Science & Technology (Jiujiang) Co., Ltd. (“Jiujiang Science”)

On 31 May 2012, the Group acquired 100% equity interests in Jiujiang Science from independent

third parties for an aggregate cash consideration of approximately RMB31,026,000. Jiujiang Science

is principally engaged in the production and sales of industrial cylinders and was acquired so as to

continue the expansion of the production of high-pressure composite cylinders. This acquisition has

been accounted for using acquisition method.


RMB’000

Cash 31,026

Acquisition-related costs were insignificant and have been excluded for the consideration

transferred and have been recognised as an expense in the current year, within the ‘administrative

expenses’ in the consolidated statement of profit or loss.


RMB’000



Inventories 18,300


Bank balances and cash 592

Income tax receivables 442


Short term loan (7,000)

32,645









(Continued)


(iii) Sinoma Science & Technology (Jiujiang) Co., Ltd. (“Jiujiang Science”) (Continued)

Gain on a bargain purchase arising on acquisition:

RMB’000



Gain on a bargain purchase arising on acquisition (1,619)

The gain on a bargain purchase is attributable to the ability of the Group in negotiating the agreed

term of the transaction with the vendor.

None of the gain on bargain purchase arising on this acquisition is expected to be taxable for tax

purpose.

Net cash outflow on acquisition of Jiujiang Science

RMB’000


Cash and cash equivalents acquired 592

(30,434)


Included in the profit for the year is loss amounted to approximately RMB2,043,000 attributable to

the additional business generated by Jiujiang Science. Turnover for the year includes approximately

RMB35,127,000 generated from Jiujiang Science.

Had the acquisition of Jiujiang Science been completed on 1 January 2012, the total amount of

turnover of the Group for the year would have been approximately RMB46,293,742,000, and profit

for the year would have been approximately RMB1,558,709,000. The pro-forma information is for

illustrative purposes only and is not necessarily an indication of turnover and results of operations

of the Group that actually would have been achieved had the acquisition been completed on 1

January 2012, nor is it intended to be a projection of future results.

In determining the ‘pro-forma’ turnover and profit of the Group had Jiujiang Science been acquired

at the beginning of the current year, the directors calculated depreciation and amortisation of

plant and equipment based on the recognised amounts of plant and equipment at the date of the

acquisition.





(Continued)


(iv) Sinomatech (Funing) Wind Power Blade Co., Ltd. (“Sinomatech”)

On 1 July 2012, the Group acquired 100% equity interests in Sinomatech from Goldwind

Investment Holding Co., Ltd., a related party of a subsidiary, for an aggregate cash consideration

of approximately RMB191,266,000. Sinomatech is principally engaged in the production and sales

of wind power blade and was acquired so as to continue the expansion of the production of wind

power blade business. This acquisition has been accounted for using acquisition method.


RMB’000

Cash 191,266





RMB’000



Inventories 105,784



Other current assets 60



191,266





(Continued)


(iv) Sinomatech (Funing) Wind Power Blade Co., Ltd. (“Sinomatech”) (Continued)





RMB’000



–

Net cash outflow on acquisition of Sinomatech

RMB’000



(144,417)


Included in the profit for the year is loss amounted to approximately RMB3,149,000 attributable

to the additional business generated by Sinomatech. Turnover for the year includes approximately

RMB145,909,000 generated from Sinomatech.

Had the acquisition of Sinomatech been completed on 1 January 2012, the total amount of turnover

of the Group for the year would have been approximately RMB46,314,763,000, and profit for the

year would have been approximately RMB1,542,382,000. The pro-forma information is for illustrative

purposes only and is not necessarily an indication of turnover and results of operations of the Group

that actually would have been achieved had the acquisition been completed on 1 January 2012, nor

is it intended to be a projection of future results.

In determining the ‘pro-forma’ turnover and profit of the Group had Sinomatech been acquired at

the beginning of the current year, the directors calculated depreciation and amortisation of plant and

equipment based on the recognised amounts of plant and equipment at the date of the acquisition.





(Continued)


(v) Ningxia Yuhao

On 31 July 2012, the Group acquired 100% equity interests in Ningxia Yuhao from independent

third parties for an aggregate cash consideration of approximately RMB11,436,000. Ningxia Yuhao is

principally engaged in the production and sales of concrete and was acquired so as to continue the

expansion of the production of concrete business. This acquisition has been accounted for using

acquisition method.


RMB’000

Cash 836

Other payable 10,600

Cash 11,436





RMB’000


Inventories 110

Trade and other receivables 645


Income tax liabilities (30)

10,510


RMB645,000. The gross contractual amounts of those trade and other receivables acquired

amounted to approximately RMB645,000 at the date of acquisition. No estimated uncollectible





48. BUSINESS COMBINATIONS OTHER THAN COMMON CONTROL COMBINATIONS (Continued)


(v) Ningxia Yuhao (Continued)


RMB’000

Consideration transferred 11,436Less: net assets acquired (10,510)

Goodwill arising on acquisition 926

Goodwill arose in the acquisition of Ningxia Yuhao because the consideration paid for the acquisition effectively included amounts in relation to the benefit of expected synergies, revenue growth, future market development and the assembled workforce of Ningxia Yuhao. These benefits are not recognised separately from goodwill because they do not meet the recognition criteria for identifiable intangible assets.


Net cash outflow on acquisition of Ningxia Yuhao

RMB’000

Cash consideration paid (836)Cash and cash equivalents acquired –

(836)


Included in the profit for the year is loss amounted to approximately RMB647,000 attributable to the additional business generated by Ningxia Yuhao. Turnover for the year includes approximately RMB7,298,000 generated from Ningxia Yuhao.

Had the acquisition of Ningxia Yuhao been completed on 1 January 2012, the total amount of turnover of the Group for the year would have been approximately RMB46,274,035,000, and profit for the year would have been approximately RMB1,565,220,000. The pro-forma information is for illustrative purposes only and is not necessarily an indication of turnover and results of operations of the Group that actually would have been achieved had the acquisition been completed on 1 January 2012, nor is it intended to be a projection of future results.

In determining the ‘pro-forma’ turnover and profit of the Group had Ningxia Yuhao been acquired at the beginning of the current year, the directors calculated depreciation and amortisation of plant and equipment based on the recognised amounts of plant and equipment at the date of the acquisition.




49. BUSINESS COMBINATIONS UNDER COMMON CONTROL

The Group adopts merger accounting for common control combinations in respect of the following transactions

occurred during the year ended 31 December 2013.

i. On 16 July 2012, Sinoma Tianjin Mining Engineering Co., Ltd. (“Tianjin Mining”), a wholly-owned

subsidiary of the Company, entered into a share transfer agreement with the Sinoma Group to acquire

100% equity interest of China Building Materials Industry Construction Tianjin Engineering Co., Ltd. (“Tianjin

Engineering”) at a consideration of approximately RMB33,995,000. The acquisition has been completed on

6 January 2013.

ii. On 16 July 2012, Chengdu Design & Research Institute of Building Materials Industry Co., Ltd. (“Chengdu

Company”), a non-wholly-owned subsidiary of the Company, entered into a share transfer agreement

with the Sinoma Group to acquire 100% equity interest of Chengdu Cement Industry Design & Research

Institute Co., Ltd. (“CCDRI”) at a consideration of approximately RMB55,574,000. The acquisition has been

completed on 6 January 2013.

iii. On 16 July 2012, Sinoma International Engineering Co., Ltd. (“Sinoma International”), a non-wholly-

owned subsidiary of the Company, entered into a share transfer agreement with the Sinoma Group to

acquire 100% equity interest of Handan Sinoma Asset Management Co., Ltd. (“Handan Sinoma”) at a

consideration of approximately RMB47,084,000. The acquisition has been completed on 21 February 2013.

iv. On 16 July 2012, Sinoma Equipment Group Co., Ltd. (“Equipment Company”), a non-wholly-owned

subsidiary of the Company, entered into a share transfer agreement with the Sinoma Group to acquire

100% equity interest of Tianjin Sinoma Asset Management Co., Ltd. (“TCDRI”) at a consideration of

approximately RMB132,268,000. The acquisition has been completed on 5 March 2013.

v. On 8 January 2013, Suzhou Sinoma Design and Research Institute of Nonmetallic Minerals Industry Co.,

Ltd. (“Suzhou Company”), a non-wholly-owned subsidiary of the Company, entered into a share transfer

agreement with the Sinoma Group to acquire 100% equity interest of Suzhou Design & Research Institute

of Non-metallic Minerals Co., Ltd. (“SDRI”) at a consideration of approximately RMB60,541,000. The

acquisition has been completed on 19 March 2013.

vi. On 19 August 2013, Sinoma Science & Technology, a non-wholly-owned subsidiary of the Company,

entered into a share transfer agreement with the Sinoma Group to acquire 100% equity interest of Nanjing

Fiberglass R&D Institute Co., Ltd. (“NRDI”) at a consideration of approximately RMB186,107,000. The

acquisition has been completed on 19 August 2013.

The parent company of Tianjin Engineering, CCDRI, Handan Sinoma, TCDRI, SDRI and NRDI (collectively named

as the “Acquired Subsidiaries”) is Sinoma Group and the aforesaid transactions are regarded as business

combinations under common control.

No significant adjustments were made to the net assets and net results of the above entities as a result of the

common control combination to achieve consistency of accounting policies.




49. BUSINESS COMBINATIONS UNDER COMMON CONTROL (Continued)

Statements of adjustments for the business combinations under common control occurred during the year ended

31 December 2013 on the Group’s financial position as at 31 December 2013 and 2012 and 1 January 2012 and

the results for the year ended 31 December 2013 and 2012 are summarised as follows:

The Group

(excluding the

Acquired

Subsidiaries)

Acquired

Subsidiaries Adjustment

The Group

(including the

Acquired

Subsidiaries)

RMB’000 RMB’000 RMB’000 RMB’000


Turnover 49,540,186 2,541,130 – 52,081,316

Cost of sales (39,706,191) (2,362,998) – (42,069,189)

Gross profit 9,833,995 178,132 – 10,012,127

Interest income 121,739 17,509 – 139,248

Other gains 1,344,743 47,092 – 1,391,835

Selling and marketing expenses (1,813,310) (9,250) – (1,822,560)

Administrative expenses (5,291,120) (159,245) – (5,450,365)

Exchange loss (85,263) – – (85,263)

Other expenses (51,895) (1,422) – (53,317)

Finance costs (1,947,612) (14,334) – (1,961,946)

Share of results of associates 66,353 – – 66,353

Share of results of joint ventures (27,269) – – (27,269)

Profit before tax 2,150,361 58,482 – 2,208,843

Income tax expense (730,951) (12,481) – (743,432)

Profit for the year 1,419,410 46,001 – 1,465,411


Owners of the Company 350,413 47,099 – 397,512

Non-controlling interests 1,068,997 (1,098) – 1,067,899

1,419,410 46,001 – 1,465,411





The Group

(excluding the

Acquired

Subsidiaries)

Acquired

Subsidiaries

Adjustment

(Note i)

The Group

(including the

Acquired

Subsidiaries)

RMB’000 RMB’000 RMB’000 RMB’000


Non-current assets

Property, plant and equipment 45,015,406 194,780 – 45,210,186


Investment properties 170,070 5,934 – 176,004

Intangible assets 696,736 25,108 – 721,844

Mining rights 512,945 – – 512,945

Investments in the Acquired Subsidiaries 515,569 – (515,569) –

Interests in associates 858,873 4,845 – 863,718

Interests in joint ventures 134,238 – – 134,238


Deposit paid for acquisition of subsidiaries – – – –



Deferred income tax assets 820,342 11,855 – 832,197

54,908,632 242,522 (515,569) 54,635,585

Current assets

Inventories 8,270,129 503,151 – 8,773,280

Trade and other receivables 20,211,355 1,382,689 – 21,594,044

Amounts due from customers for

contract work 599,010 – – 599,010





Bank balances and cash 6,542,599 727,456 – 7,270,055

37,263,152 2,613,296 – 39,876,448

Assets classified as held for sale – – – –

37,263,152 2,613,296 – 39,876,448





The Group(excluding the

AcquiredSubsidiaries)

AcquiredSubsidiaries

Adjustment(Note i)

The Group(including the


RMB’000 RMB’000 RMB’000 RMB’000


Current liabilitiesTrade and other payables 26,586,551 1,866,587 – 28,453,138Dividend payable 8,117 – – 8,117Amounts due to customers for contract work 343,066 – – 343,066Derivative financial instruments – – – –Income tax liabilities 419,217 6,973 – 426,190Short-term financing bills 2,900,000 – – 2,900,000Borrowings 15,952,976 304,845 – 16,257,821Early retirement and supplemental benefit obligations 50,897 – – 50,897Provisions 25,060 – – 25,060

46,285,884 2,178,405 – 48,464,289Liabilities classified as held for sale – – – –

46,285,884 2,178,405 – 48,464,289


Total assets less current liabilities 45,885,900 677,413 (515,569) 46,047,744

Non-current liabilitiesTrade and other payables 4,034 – – 4,034Derivative financial instruments – – – –Corporate bonds 2,492,782 – – 2,492,782Medium-term notes 5,755,339 – – 5,755,339Borrowings 7,931,426 – – 7,931,426Provisions 56,460 – – 56,460Deferred income 764,333 – – 764,333Early retirement and supplemental benefit obligations 266,371 – – 266,371Deferred income tax liabilities 590,620 18,222 – 608,842

17,861,365 18,222 – 17,879,587

NET ASSETS 28,024,535 659,191 (515,569) 28,168,157





The Group

(excluding the

Acquired

Subsidiaries)

Acquired

Subsidiaries

Adjustment

(Note i)

The Group

(including the

Acquired

Subsidiaries)

RMB’000 RMB’000 RMB’000 RMB’000



Share capital 3,571,464 154,999 (154,999) 3,571,464

Reserves 6,971,338 501,864 360,570 7,833,772

Equity attributable to owners of the Company 10,542,802 656,863 205,571 11,405,236

Non-controlling interests 16,760,593 2,328 – 16,762,921

TOTAL EQUITY 27,303,395 659,191 205,571 28,168,157





The Group

(excluding the

Acquired

Subsidiaries)

Acquired

Subsidiaries Adjustment

The Group

(including the

Acquired

Subsidiaries)

RMB’000 RMB’000 RMB’000 RMB’000


Turnover 46,106,771 80,300 – 46,187,071

Cost of sales (37,788,059) (40,986) – (37,829,045)

Gross profit 8,318,712 39,314 – 8,358,026

Interest income 169,353 735 – 170,088

Other gains 1,367,117 85,441 – 1,452,558

Selling and marketing expenses (1,549,819) (3,823) – (1,553,642)

Administrative expenses (4,507,015) (144,277) – (4,651,292)

Exchange gain 1,687 – – 1,687

Other expenses (29,895) (1,912) – (31,807)

Finance costs (1,683,462) (51) – (1,683,513)

Share of results of associates 7,365 – – 7,365

Share of results of joint ventures (10,674) – – (10,674)

Profit before tax 2,083,369 (24,573) – 2,058,796

Income tax expense (513,565) 609 – (512,956)

Profit for the year 1,569,804 (23,964) – 1,545,840


Owners of the Company 475,876 (23,583) – 452,293

Non-controlling interests 1,093,928 (381) – 1,093,547

1,569,804 (23,964) – 1,545,840





The Group

(excluding the

Acquired

Subsidiaries)

Acquired

Subsidiaries

Adjustment

(Note ii)

The Group

(including the

Acquired

Subsidiaries)

RMB’000 RMB’000 RMB’000 RMB’000 3


Non-current assets


Prepaid lease payments 3,422,727 8,709 – 3,431,436


Intangible assets 738,371 – – 738,371

Mining rights 483,087 – – 483,087


Interest in joint ventures 162,496 – – 162,496

Available-for-sale financial assets 2,282,625 5,695 – 2,288,320



Deferred income tax assets 700,257 4,180 – 704,437 3

50,816,244 182,030 – 50,998,274 3

Current assets

Inventories 8,378,135 15,211 – 8,393,346

Trade and other receivables 16,601,578 46,200 – 16,647,778

Amounts due from customers

for contract work 562,674 – – 562,674

Prepaid lease payments 118,871 157 – 119,028



Restricted bank balances 1,969,306 4,783 – 1,974,089

Bank balances and cash 9,175,050 60,217 – 9,235,267 3

36,879,864 126,568 – 37,006,432

Assets classified as held for sale – – – – 3

36,879,864 126,568 – 37,006,432 3








Adjustment(Note ii)



RMB’000 RMB’000 RMB’000 RMB’000


Current liabilitiesTrade and other payables 24,914,442 68,652 – 24,983,094Dividend payable 7,936 – – 7,936Amounts due to customers for contract work 292,648 – – 292,648Derivative financial instruments 657 – – 657Income tax liabilities 432,616 519 – 433,135Short-term financing bills 400,000 – – 400,000Borrowings 15,749,447 – – 15,749,447

Early retirement and supplemental benefit obligations 49,114 – – 49,114Provisions 48,724 – – 48,724

3

41,895,584 69,171 – 41,964,755Liabilities classified as held for sale – – – –

3

41,895,584 69,171 – 41,964,755 3

Net current (liabilities) assets (5,015,720) 57,397 – (4,958,323) 3

Total assets less current liabilities 45,800,524 239,427 – 46,039,951 3

Non-current liabilitiesTrade and other payables 4,645 – – 4,645Derivative financial instruments – – – –Corporate bonds 2,490,239 – – 2,490,239Medium-term notes 5,253,610 – – 5,253,610Borrowings 9,280,599 – – 9,280,599Provisions 44,788 – – 44,788Deferred income 688,903 – – 688,903Early retirement and supplemental benefit obligations 285,752 – – 282,752Deferred income tax liabilities 678,096 19,103 – 697,199

3

18,723,632 19,103 – 18,742,735 3

NET ASSETS 27,076,892 220,324 – 27,297,216 3





The Group

(excluding the

Acquired

Subsidiaries)

Acquired

Subsidiaries

Adjustment

(Note ii)

The Group

(including the

Acquired

Subsidiaries)

RMB’000 RMB’000 RMB’000 RMB’000



Share capital 3,571,464 124,184 (124,184) 3,571,464

Reserves 7,688,926 93,198 124,184 7,906,308

Equity attributable to owners

of the Company 11,260,390 217,382 – 11,477,772


TOTAL EQUITY 27,076,892 220,324 – 27,297,216





The Group

(excluding the

Acquired

Subsidiaries)

Acquired

Subsidiaries

Adjustment

(Note ii)

The Group

(including the

Acquired

Subsidiaries)

RMB’000 RMB’000 RMB’000 RMB’000


Non-current assets


Prepaid lease payments 3,144,591 8,866 – 3,153,457


Intangible assets 501,651 – – 501,651

Mining rights 477,166 – – 477,166


Interest in joint ventures 174,970 – – 174,970

Available-for-sale financial assets 2,346,251 5,695 – 2,351,946

Deposits paid for acquired of subsidiaries 101,400 – – 101,400


Other non-current assets 237,789 193 – 237,982

Deferred income tax assets 592,023 1,943 – 593,966

43,143,797 187,210 – 43,331,007

Current assets

Inventories 8,116,042 15,606 – 8,131,648

Trade and other receivables 15,603,842 60,518 – 15,664,360

Amounts due from customers for

contract work 341,073 – – 341,073

Prepaid lease payments 100,391 157 – 100,548




Bank balances and cash 10,171,131 120,168 – 10,291,299

36,289,867 196,449 – 36,486,316

Assets classified as held for sale 117,426 – – 117,426

36,407,293 196,449 – 36,603,742








Adjustment(Note ii)



RMB’000 RMB’000 RMB’000 RMB’000


Current liabilitiesTrade and other payables 22,698,112 117,782 – 22,815,894Dividend payable 2,498 733 – 3,231Amounts due to customers for contract work 131,295 – – 131,295Derivative financial instruments 138 – – 138Income tax liabilities 604,237 2,301 – 606,538Short-term financing bills 800,000 – – 800,000Borrowings 13,466,246 – – 13,466,246Early retirement and supplemental benefit obligations 44,525 – – 44,525Provisions 41,398 – – 41,398

37,788,449 120,816 – 37,909,265Liabilities classified as held for sale 12,038 – – 12,038

37,800,487 120,816 – 37,921,303


Total assets less current liabilities 41,750,603 262,843 – 42,013,446

Non-current liabilitiesTrade and other payables 4,120 – – 4,120Derivative financial instruments 775 – – 775Corporate bonds 2,487,829 – – 2,487,829Medium-term notes 4,352,670 – – 4,352,670Borrowings 9,641,003 – – 9,641,003Provisions 44,874 – – 44,874Deferred income 446,482 – – 446,482Early retirement and supplemental benefit obligations 297,813 – – 297,813Deferred income tax liabilities 689,303 18,555 – 707,858

17,964,869 18,555 – 17,983,424

NET ASSETS 23,785,734 244,288 – 24,030,022





The Group

(excluding the

Acquired

Subsidiaries)

Acquired

Subsidiaries

Adjustment

(Note ii)

The Group

(including the

Acquired

Subsidiaries)

RMB’000 RMB’000 RMB’000 RMB’000



Share capital 3,571,464 124,184 (124,184) 3,571,464

Reserves 7,409,096 116,781 124,184 7,650,061

Equity attributable to owners

of the Company 10,980,560 240,965 – 11,221,525


TOTAL EQUITY 23,785,734 244,288 – 24,030,022

Notes:

(i) The adjustment comprise of elimination of the paid-in capital of the Acquired Subsidiaries against the investment costs.

The consideration for the acquisition of the Acquired Subsidiaries amounted to approximately RMB515,569,000 in

aggregate and the aggregate paid-in capital of the Acquired Subsidiaries at the date of combination were approximately

RMB154,999,000.

(ii) The adjustment represents elimination of the paid-in capital of the Acquired Subsidiaries as at 31 December 2012 and 1

January 2012 with a corresponding entry to capital reserve. The difference of approximately RMB360,570,000 has been

recorded in capital reserve.

The effects of adopting merger accounting for common control combination on the Group’s basic and diluted

earnings per share for the year ended 31 December 2013 and 2012:

Basic and diluted earnings per share 2013 2012

RMB RMB

Reported figures before adjustments 0.098 0.134

Adjustments arising on common control combination 0.013 (0.007)

Restated figures after adjustments 0.111 0.127





The Group has adopted merger accounting for common control combinations in respect of the following

transactions during the year ended 31 December 2012.

(a) On 28 February 2012, Sinoma International Engineering Co. Ltd. (“Sinoma International”), a non-wholly-

owned subsidiary of the Company, entered into a share transfer agreement with Sinoma Group to acquire

100% equity interest of Nanijing Cement Industry Design & Research Institute Co., Ltd. (“Nanjing Cement

Institute”) at a consideration of approximately RMB125,570,000. The acquisition has been completed on

31 March 2012.

(b) On 28 February 2012, Sinoma (Suzhou) Construction Co., Ltd., a non-wholly-owned subsidiary of the

Company, entered into a share transfer agreement with Sinoma Group to acquire 100% equity interest of

Sinoma Asset Management (Suzhou) Company Limited (“Suzhou Assets Management”) at a consideration

of approximately RMB58,122,000. The acquisition has been completed on 31 March 2012.

(c) On 28 February 2012, CBMI Construction Co., Ltd., a non-wholly-owned subsidiary of the Company,

entered into a share transfer agreement with Sinoma Group to acquire 100% equity interest of Tangshan

Sinoma Property Management Company Limited (“Property Management”) at a consideration of

approximately RMB14,356,000. The acquisition has been completed on 31 March 2012.

The immediate holding company of Nanjing Cement Institute, Suzhou Assets Management and Property

Management (collectively named as the “Acquired Subsidiaries”) prior to the acquisition by the Group is Sinoma

Group and the aforesaid transactions are regarded as business combinations under common control.

No significant adjustments were made to the net assets and net results of the above entities as a result of the

common control combination to achieve consistency of accounting policies.

The financial information for the business combinations under common control occurred during the year ended

31 December 2012 has already been included in the opening balances and comparative figures disclosed in the

consolidated financial statements due to the adoption of merger accounting in the previous year. As a result, the

above transactions have no impact to the financial information in the current year.




50. DISPOSAL OF SUBSIDIARIES


(i) Lanzhou Hongjian Commodity Concrete Co., Ltd. (“Lanzhou Hongjian”)

On 31 May 2012, the Group disposed of its 60% equity interests, being the entire equity interest held by

the Group, in Lanzhou Hongjian to an independent third party for a total consideration of RMB30,000,000.

Consideration received

RMB’000

Cash 10,000Other receivables (due for settlement within one year) 20,000

Total consideration received 30,000

Analysis of assets and liabilities over which control was lost:

31/5/2012RMB’000


Deferred income tax assets 9,431

Inventories 3,688





Borrowings (18,800)


Net assets disposed of 68,418

Loss on disposal of a subsidiary:

RMB’000

Consideration received 30,000

Net assets disposed of (68,418)

Non-controlling interests 27,367

Loss on disposal (11,051)




50. DISPOSAL OF SUBSIDIARIES (Continued)

For the year ended 31 December 2012 (Continued)

(i) Lanzhou Hongjian Commodity Concrete Co., Ltd. (“Lanzhou Hongjian”) (Continued)

Net cash inflow on disposal of Lanzhou Hongjian

RMB’000

Cash consideration received 10,000

Cash and cash equivalents disposed of (4,615)

5,385

The subsidiary disposed of during the year ended 31 December 2012 contributed approximately

RMB47,913,000 to the Group’s turnover and no significant impact on the results of the Group. The

subsidiary also contributed approximately RMB6,884,000 to the Group’s net operating cash flow and paid

approximately RMB7,640,000 in respect of financing activities. The subsidiary had no contribution to the

Group’s cash flow from investing activities.

(ii) Taian Electric

On 10 September 2012, the Group disposed of its 100% equity interests in Taian Electric, a wholly-owned

subsidiary of the Group, to an independent third party for a total consideration of RMB270,000,000.

Consideration received

RMB’000

Cash 131,000

Other receivables (note) 139,000

Total consideration received 270,000






(ii) Taian Electric (Continued)

Analysis of assets and liabilities over which control was lost:

10/9/2012RMB’000


Inventories 7,955

Trade and other receivables 822




Net assets disposed of 99,712

Gain on disposal of a subsidiary

RMB’000

Consideration received 270,000

Plus: Non-controlling interests (42.35% in a subsidiary of Taian Electric) 5,857

Less: Net assets disposed of (99,712)

Gain on disposal 176,145

Net cash inflow on disposal of Taian Electric

RMB’000

Cash consideration received 131,000

Cash and cash equivalents disposed of (6,152)

124,848

The subsidiary disposed of during the year ended 31 December 2012 contributed approximately

RMB3,406,000 to the Group’s turnover and no significant impact on the results of the Group. The

subsidiary also contributed approximately RMB4,894,000 to the Group’s net operating cash outflow, and

paid approximately RMB4,894,000 in respect of investing activities. The subsidiary had no contribution to

the Group’s cash flows from financing activities.






(ii) Taian Electric (Continued)

Note:

As at 31 December 2012, the directors of the Company determined that the recoverability of other receivables regarding

the consideration has uncertainty and impairment provision of RMB69,500,000. For the year ended 31 December 2013,

the Company has entered into settlement agreement with the buyer and received partial settlement of RMB50,000,000,

the directors of the Company have reassessed the recoverability of the remaining other receivables and reversal of

provision of RMB25,000,000 was provided in note 32 (g).

51. CONTINGENT LIABILITIES

2013 2012

RMB’000 RMB’000

Outstanding guarantees (Note a) – 30,000

Notes:

(a) The Group has acted as the guarantors for various external borrowings made by other state-owned enterprises and

certain independent third parties. At 31 December 2012, outstanding guarantees amounted to RMB30,000,000 have

been utilised by other state-owned enterprises and independent third parties. No outstanding guarantees were noted at

the end of the reporting period.

(b) At the end of the reporting period, theGroup has provided the following guarantees to other state-owned enterprises/

independent third parties which will be expiring:

2013 2012

RMB’000 RMB’000

Within one year – 30,000




52. COMMITMENTS

(a) Capital commitments

2013 2012

RMB’000 RMB’000

Capital expenditure contracted for but not provided in the

consolidated financial statements in respect of the acquisition of:

– Property, plant and equipment 703,023 924,848

– Prepaid lease payments 2,077 4,265

705,100 929,113

(b) Operating lease commitments

The Group as lessee

The Group leases various offices, warehouses and residential properties under non-cancellable operating

lease agreements. At the end of the reporting period, the Group had commitments for future minimum

lease payments under non-cancellable operating leases which fall due as follows:

2013 2012

RMB’000 RMB’000

Within one year 2,750 1,041

In the second to fifth year inclusive 6,784 6,394

After five years 40,463 42,110

49,997 49,545

Operating lease payments represents rentals payables by the Group for various offices, warehouses and

residential properties. Leases are negotiated for a period from 2 to 20 years and rentals are fixed during

the relevant lease periods.




52. COMMITMENTS

(b) Operating lease commitments (Continued)

The Group as lessor

The Group rents out various investment properties under non-cancellable operating lease agreements. The

rented out properties are expected to generate rental yield of 22% (2012: 21%) on an ongoing basis. All of

the properties held have committed tenants for the next 5 years.

At the end of the reporting period, the Group had contracted with tenants for future minimum lease

payments as follows:

2013 2012

RMB’000 RMB’000

Within one year 9,680 7,431

In the second to fifth year inclusive 8,556 9,802

After five years 8,811 8,658

27,047 25,891

53. NOTES TO CONSOLIDATED STATEMENT OF CASH FLOWS

(a) During the year ended 31 December 2013, the Group has acquired property, plant and equipment

amounting to approximately RMB2,712,305,000 which has been settled by bills receivables.

(b) During the year ended 31 December 2013, the Group has acquired property, plant and equipment

amounting to approximately RMB1,004,744,000 which has been included in other payables as at 31

December 2013.

(c) During the year ended 31 December 2012, the Group has acquired property, plant and equipment

amounting to approximately RMB2,953,086,000 which has been settled by bills receivables.

(d) During the year ended 31 December 2012, the Group has acquired property, plant and equipment

amounting to approximately RMB915,038,000 which has been included in other payables as at 31

December 2012.




54. RELATED PARTY DISCLOSURES

Sinoma Group, the immediate holding company of the Company, is owned and controlled by the State-owned

Assets Supervision and Administration Commission of the State Council. The State Council is the Company’s

ultimate controlling party, which also controls a significant portion of the productive assets and entities in the PRC

(collectively referred as the “state-owned enterprises”). Neither Sinoma Group nor the State Council published

financial statements available for public use.

In accordance with HKAS 24 (Revised), the Group is exempted from disclosures of transactions with other state-

owned enterprises and their subsidiaries, directly or indirectly controlled by the PRC government.

In addition to the related party information disclosed elsewhere in the consolidated financial statements, the

following is a summary of significant related party transactions entered into in the ordinary course of business

between the Group and its related parties, excluding other state-owned enterprises, during the two years ended

31 December 2013 and 2012 and balances as at 31 December 2013, 31 December 2012 and 1 January 2012 with

related party transactions.

The transactions with related parties are carried out on pricing and settlement terms agreed with counter parties

in the ordinary course of business.

(i) Transactions and balances with other state-owned enterprises

(a) The Group’s transactions with other state-owned enterprises only accounted for less than 5% of

the Group’s revenue and cost of sales for the two years ended 31 December 2013 and 2012.

(b) The balances with other state-owned enterprises and Sinoma Group and its fellow subsidiaries

only accounted for less than 5% of the Group’s trade and other receivables and trade and other

payables as at 31 December 2013 and 2012. However, over 95% of the Group’s borrowings were

obtained from and over 95% of the Group’s cash and cash equivalents are maintained with other

state-owned enterprises.

In addition, as at 31 December 2013 and 2012, certain borrowings of the Group were secured

by the corporate guarantees executed by other state-owned enterprises and about 5% of the

outstanding guarantees provided by the Group were in favor of other state-owned enterprises.




54. RELATED PARTY DISCLOSURES (Continued)

(ii) Significant transactions and balances with related parties other than state-owned enterprises

The Group has the following significant transactions with related parties other than other state-owned

enterprises:

2013 2012


Transactions with joint ventures

Revenue

– Sales of goods or provision of services 17,235 26,486

– Interest income (Note) – 2,198

Expenses

– Purchases of goods or services 7,088 10,563

Transactions with associates

Revenue

– Sales of goods or provision of services 891 –

Expenses


Transactions with non-controlling interests

Revenue

– Sales of goods or provision of services 96,881 4,193

Expenses


– Rental expenses 2,000 1,640

Transactions with joint venture partners of

joint ventures

Revenue

– Sales of goods or provision of services – 53,057

Expenses

– Purchases of goods or services – 11,125

Note: The interest income was included in the interest income on loan receivables in Note 10.





(ii) Significant transactions and balances with related parties other than state-owned enterprises (Continued)

Balances with related parties other than other state-owned enterprises:

2013 2012


Trade and other receivables

Trade receivables due from

– Joint ventures 7,319 19,374

– Associates 265 –

– Non-controlling interests 29,072 20,107

– Joint venture partners of joint ventures – 9,460

– Less: Impairment loss recognised (2,566) (18,252)

34,090 30,689

Loan receivables due from

– Joint ventures 57 30,000

Other receivables due from

– Associates 4,116 11,473

– Non-controlling interests – 67,500

– Less: Impairment loss recognised (427) (2,466)

3,689 76,507

37,836 137,196





(ii) Significant transactions and balances with related parties other than state-owned enterprises (Continued)

2013 2012


Trade and other payables

Trade payables due to

– Jointly controlled entities 6,498 6,177

– Associates – 19,289


– Joint venture partners – 2,010

24,049 33,898

Other payables due to


– Joint venture partners – 4,000

30,086 33,992

54,135 67,890

The credit periods of trade receivables due from related parties and trade payables due to related parties,

if any, generally range from 30 to 365 days. Other receivables due from related parties and other payables

due to related parties are generally unsecured, non-interest bearing and repayable on demand.





(iii) Compensation of key management personnel

The remuneration of directors and other members of key management during the year was as follows:

2013 2012

RMB’000 RMB’000

Short-term benefits 6,969 14,528

Post employment benefits 477 419

Cash-settled share-based payments (172) (420)

7,274 14,527

The remuneration of the key management is determined by the remuneration committee and having regard

to the performance of individuals and market trends.

55. CHARGE OF ASSETS

The carrying values of Group’s assets that are pledged to secure bank borrowings are as follows:

31 December

2013

31 December

2012

RMB’000 RMB’000

Property, plant and equipment 1,079,590 3,305,167

Prepaid lease payments 49,330 170,382




56. PARTICULARS OF PRINCIPAL SUBSIDIARIES

(a) General information of subsidiaries

As at 31 December 2013 and 2012, the Company has direct and indirect equity interests in the following

principal subsidiaries:

Attributable equity

interest

Name

Place and date of

incorporation and

type of legal entities

Issued/

paid-in

capital

Directly

held

Indirectly

held

Principal activities and

place of operation

RMB’000

Listed:

Sinoma International

(中國中材國際工程股份有限公司)

The PRC

28 December 2001

Joint stock company

1,093,297 42.46%

(Note (i) (1))– Construction and

engineering services;

The PRC, Europe,

Africa and other Asian countries

Sinoma Science & Technology

(中材科技股份有限公司)

The PRC

28 December 2001

Joint stock company

400,000 54.32%

(Note (i) (2))– High-tech materials operations;

The PRC

Tianshan Cement

(新疆天山水泥股份有限公司)

The PRC

18 November 1998

Joint stock company

880,101 35.49%

(2012:

35.39%)

(Note (i) (3))

– Cement operations;

The PRC

Ningxia Building Materials

(寧夏建材集團股份有限公司)

The PRC

4 December 1998

Joint stock company

478,318 47.54%

(2012:

47.57%)

(Note (i) (4))

– Cement operations;

The PRC

Qilianshan Co.

(甘肅祁連山水泥集團股份有限公司)

The PRC

3 December 1995

Joint stock company

597,146 13.24%

(Note (i) (5))13.22% Cement Operations;

The PRC




Attributable equity

interest

Name

Place and date of

incorporation and


Issued/

paid-in

capital

Directly

held

Indirectly

held


place of operation

RMB’000

Unlisted:

CBMI Construction Co., Ltd.

(中材建設有限公司)

The PRC

13 November 2002

Limited liability company

72,580 – 100% Construction and


The PRC, Africa, Europe and

South America

Chengdu Design & Research

Institute of Building Materials

Industry Co., Ltd.

(成都建築材料工業設計研究院有限公司)

The PRC

28 November 2002




The PRC

Sinoma Tangshan Heavy

Machinery Co., Ltd.

(唐山中材重型機械有限公司)

The PRC

27 January 2003


30,006 – 100% Manufacture of cement equipment;

The PRC

Sinoma (Suzhou) Construction

Co., Ltd.

(蘇州中材建設有限公司)

The PRC

19 December 2002




The PRC

Sinoma Equipment Group Co. Ltd.

(中材裝備集團有限公司)

The PRC

13 December 2006




The PRC, Africa and

other Asian countries

Sinoma Equipment &

Engineering Corp Ltd.

(中國中材東方國際貿易有限公司)

The PRC

3 June 1988




The PRC and other Asian countries

CEMTECH Tianjin Heavy

Machinery Co. Ltd.

(中材（天津）重型機械有限公司)

The PRC

7 April 2000



The PRC

CEMTECH Xuzhou Heavy

Machinery Co., Ltd.

(中天仕名（徐州）重型機械有限公司)

The PRC

16 December 2002



The PRC

56. PARTICULARS OF PRINCIPAL SUBSIDIARIES (Continued)

(a) General information of subsidiaries (Continued)




Attributable equity

interest

Name

Place and date of

incorporation and


Issued/

paid-in

capital

Directly

held

Indirectly

held


place of operation

RMB’000

Unlisted: (Continued)CEMTECH Zibo Heavy

Machinery Co., Ltd.

(中天仕名（淄博）重型機械有限公司)

The PRC

8 January 2002



The PRC

CEMTECH Changshu

(常熟仕名重型機械有限公司)

The PRC

23 October 2003



The PRC

China Building Materials Industrial

Corporation Xi’an Engineering

Co., Ltd.

(中國建築材料工業建設西安工程有限公司)

The PRC

28 December 2001




The PRC

Sinoma Nanjing Mining

Engineering Co., Ltd.

(中國非金屬材料南京礦山工程有限公司)

The PRC

29 June 2007




The PRC

Sinoma Shangrao

(上饒中材機械有限公司)

The PRC

19 April 2007




The PRC

Sinoma Tianjin Mining


(天津礦山工程有限公司)

The PRC

26 June 2007




The PRC

Sinoma Yanzhou Mining


(兗州中材建設工程有限公司)

The PRC

14 August 2007




The PRC

Henan Sinoma Environmental

Protection Co., Ltd.

(河南中材環保有限公司)

The PRC

17 November 2003


28,500 – 100% Manufacture of

environmentally-friendly

equipment;

The PRC






Attributable equity

interest

Name

Place and date of

incorporation and


Issued/

paid-in

capital

Directly

held

Indirectly

held


place of operation

RMB’000

Unlisted: (Continued)Sinoma Cement

(中材水泥有限責任公司)

The PRC

20 November 2003


1,823,140 100% – Cement operations;

The PRC

Sinoma Hanjiang

(中材漢江水泥股份有限公司)

The PRC

25 August 1994

Joint stock company

277,916 – 91.83% Cement operations;

The PRC

Sinoma Hengda Cement Co., Ltd.

(中材亨達水泥有限公司)

The PRC

6 February 2006


270,000 – 70% Cement operations;

The PRC

Yunfu Tianshan Cement Co., Ltd.

(中材天山（雲浮）水泥有限公司)

The PRC

4 April 2003



The PRC

Xinjiang Tianshan Zhuyou

Concrete Co., Ltd.

(新疆天山築友混凝土有限責任公司)

The PRC

20 April 2003



The PRC

Xinjiang Hejing Tianshan

Cement Co., Ltd.

(新疆和靜天山水泥有限責任公司)

The PRC

16 January 1996



The PRC

Korla Tianshan Shenzhou

Concrete Co., Ltd.

(庫爾勒天山神州混凝土有限責任公司)

The PRC

28 January 2003



The PRC

Aksu Tianshan Duolang Cement

Co., Ltd.

(阿克蘇天山多浪水泥有限責任公司)

The PRC

25 April 2001



The PRC

Xinjiang Tunhe Cement Co., Ltd.

(新疆屯河水泥有限責任公司)

The PRC

16 October 2000



The PRC






Attributable equity

interest

Name

Place and date of

incorporation and


Issued/

paid-in

capital

Directly

held

Indirectly

held


place of operation

RMB’000

Unlisted: (Continued)Suzhou Tianshan Cement Co., Ltd.

(蘇州天山水泥有限責任公司)

The PRC

6 November 2003



The PRC

Wuxi Tianshan Cement Co., Ltd.

(無鍚天山水泥有限公司)

The PRC

28 February 2003



The PRC

Jiangsu Tianshan Cement (Group)

Co., Ltd.

(江蘇天山水泥集團有限公司)

The PRC

11 November 2002



The PRC

Suzhou Tianshan Concrete Co., Ltd.

(蘇州天山商品混凝土有限公司)

The PRC

26 July 2002



The PRC

Sinoma Advanced Materials Co. Ltd.

(中材高新材料股份有限公司)

The PRC

25 December 2000

Joint stock company

107,591 99.46% – High-tech materials operations;

The PRC

Jiangxi Sinoma New Solar Materials

Co., Ltd.

(江西中材太陽能新材料有限公司)

The PRC

30 April 2007


100,000 – 64% Manufacture of new materials;

The PRC

Beijing Sinoma Synthetic Crystals

Co., Ltd.

(北京中材人工晶體研究院有限公司)

The PRC

22 April 2005


40,000 – 100% High-tech materials operations;

The PRC

Beijing Composite Material Co., Ltd.

(北京玻鋼院複合材料有限公司)

The PRC

2 January 2003


60,000 20% 80% High-tech materials operations;

The PRC

Sinoma Science &

Technology (Suzhou) Co., Ltd.

(中材科技（蘇州）有限公司)

The PRC

26 October 2004


180,000 – 100% High-tech materials operations;

The PRC






Attributable equity

interest

Name

Place and date of

incorporation and


Issued/

paid-in

capital

Directly

held

Indirectly

held


place of operation

RMB’000

Unlisted: (Continued)Taishan Fiberglass Inc.

(泰山玻璃纖維有限公司)

The PRC

17 September 1999


1,934,712 100% – Glass fiber operations;

The PRC

Taishan Fiberglass Zoucheng Co., Ltd.

(泰山玻璃纖維鄒城有限公司)

The PRC

26 July 2001


806,865 – 87.41% Glass fiber operations;

The PRC

Taishan Composite

(山東泰山複合材料有限公司)

The PRC

16 April 2003


238,684 – 100% Glass fiber operations;

The PRC

CTG International Inc.

(CTG 北美貿易有限公司)

United States (“U.S.”)

16 April 2004


13,457 – 100% Trading of glass fiber;

U.S.

Tai’an Huatai Nonmetal Micronization

Co., Ltd.

(泰安華泰非金屬微粉有限公司)

The PRC

4 January 2002


18,980 – 100% Production and sale of

non-metallic crystal;

The PRC

Sinoma Jinjing Fiber Glass Co., Ltd.

(中材金晶玻纖有限公司)

The PRC

17 January 2004


203,957 50.01% – Glass fiber operations;

The PRC

Xiamen ISO Standard Sand Co., Ltd.

(廈門艾思歐標準砂有限公司)

The PRC

22 December 1999


32,000 51% – Manufacture of Chinese ISO

standard sands;

The PRC

Yixing Tianshan

(宜興天山水泥有限責任公司)

The PRC

29 July 2008



The PRC

Midong Tianshan Cement Co. Ltd.

(新疆米東天山水泥有限公司)

The PRC

24 April 2007



The PRC






Attributable equity

interest

Name

Place and date of

incorporation and


Issued/

paid-in

capital

Directly

held

Indirectly

held


place of operation

RMB’000

Unlisted: (Continued)Sinoma Luoding Cement Co., Ltd.

(中材羅定水泥有限公司)

The PRC

4 December 2007


290,000 – 100% Production and sales of

cement and clinker;

The PRC

Sinoma Zhuzhou Cement Co. Ltd.

(中材株洲水泥有限公司)

The PRC

11 October 2005


230,000 – 100% Cement operation;

The PRC

Sinoma Changde Cement Co. Ltd.

(中材常德水泥有限責任公司) (formerly

known as Changde Sinoma Cement

Co.Ltd, 常德中材牛力水泥有限公司)

The PRC

10 October 2007



The PRC

Sinoma Xiang Tan Cement Co. Ltd.

(中材湘潭水泥有限公司) (formerly

known as Xiang Tan Sinoma

Cement Co.Ltd,

湘潭中材牛力水泥有限公司)

The PRC

28 September 2007


289,710 – 100% Production and sales of

cement and clinker;

The PRC

Sinoma Fan Blades

(中材科技風電葉片股份有限公司)

The PRC

14 June 2007 Joint stock

company

441,019 – 85.46% Sales of wind power blade;

The PRC

Ning Xia Qingtongxia Cement Co. Ltd.

(寧夏青銅峽水泥股份有限公司)

The PRC

11 August 2001

Joint stock company

334,750 – 87.19% Cement operation;

The PRC

Ning Xia Zhongning Saima Cement

Co. Ltd.

(寧夏中寧賽馬水泥有限公司)

The PRC

24 June 2004



The PRC

Xiahe Anduo

(夏河祁連山安多水泥有限責任公司)

The PRC

1 February 2000



The PRC






Attributable equity

interest

Name

Place and date of

incorporation and


Issued/

paid-in

capital

Directly

held

Indirectly

held


place of operation

RMB’000

Unlisted: (Continued)Sinomatech (Funing) Wind Power

Blade Co., Ltd.

(中材科技（阜寧）風電葉片有限公司)

The PRC

26 December 2007


318,607 – 100% Sales of wind power blade;

The PRC

Energy and Infrastructure Limited

(能源和基建有限公司)

Saudi Arabia

3 February 2013


31,848

(Note (ii))– 51% Construction and


Saudi Arabia

Sinoma International Engineering (HK)

Co., Limited

(中材國際工程股份（香港）有限公司)

Hong Kong

22 January 2013


158,052

(Note (ii))– 100% Investment in construction project,

The PRC

Nanjing National Materials Testing

Technology Co., Ltd.

(南京中材檢測技術有限公司)

The PRC

1 January 2013


500

(Note (ii))– 100% Inspection service,

The PRC

中材江西電瓷電氣有限公司 The PRC

22 March 2013


100,000

(Note (ii))– 70% Sales of insulators for

high voltage power transmission

The above table lists the subsidiaries of the Group which, in the opinion of the directors, principally affected the results or assets of the Group. To give details of other subsidiaries would, in the opinion of the directors, result in particulars of excessive length.

(i) As at 31 December 2013 and 2012, the Group’s shares in companies listed in the PRC comprise:

(1) 42.46% (2012: 42.46%) equity interests in Sinoma International, a company listed on the Shanghai Stock Exchange of the PRC. The Company’s equity interests in Sinoma International represents 464,263,219 A shares. The market value of the 464,263,219 tradable shares as at 31 December 2013 is approximately RMB3,853,384,718 (2012: RMB5,719,723,000 for 464,263,219 tradable shares).

The directors of the Company concluded that the Group has a sufficiently dominant voting interest to direct the relevant activities of Sinoma International on the basis of the Group’s absolute size of shareholding and the relative size of and dispersion of the shareholdings owned by other shareholders. There are another three shareholders individually holding more than 1% with aggregation of ownership interests of 22.25%. The remaining 35.29% ownership interests in Sinoma International are owned by thousands of shareholders that are unrelated to the Group.









(Continued)

(2) 54.32% (2012: 54.32%) equity interests in Sinoma Science & Technology, a company listed on the Shenzhen Stock Exchange of the PRC. The Company’s equity interests in Sinoma Science & Technology represents 217,298,286 A shares. The market value of the 217,298,286 tradable shares as at 31 December 2013 is approximately RMB2,679,287,866 (2012: RMB1,690,581,000 for 217,298,286 tradable shares).

The directors of the Company concluded that the Group has a sufficiently dominant voting interest to direct the relevant activities of Sinoma Science & Technology on the basis of the Group’s absolute size of shareholding and the relative size of and dispersion of the shareholdings owned by other shareholders. There are another five shareholders individually holding more than 1% with aggregation of ownership interests of 16.84%. The remaining 28.84% ownership interests in Sinoma Science & Technology are owned by thousands of shareholders that are unrelated to the Group.

(3) 35.49% (2012: 35.39%) equity interests in Tianshan Cement, a company listed on the

Shenzhen Stock Exchange of the PRC. The Company’s equity interests in Tianshan Cement

represents 312,382,428 A shares. The market value of the 312,382,428 tradable shares as

at 31 December 2013 is approximately RMB1,899,285,162 (2012: RMB1,630,050,000 for

89,955,021 tradable shares).

The directors of the Company concluded that the Group has a sufficiently dominant voting

interest to direct the relevant activities of Tianshan Cement on the basis of the Group’s

absolute size of shareholding and the relative size of and dispersion of the shareholdings

owned by other shareholder. The remaining 64.51% ownership interests in Tianshan Cement

are owned by thousands of shareholders that are unrelated to the Group, none individually

holding more than 1%.

(4) 47.54% (2012: 47.57%) equity interests in Ningxia Building Materials, a company listed on

the Shanghai Stock Exchange of the PRC. The Group’s equity interests in Ningxia Building

Materials represents 227,413,290 (2012: 227,551,086) A shares which will be tradable since

21 December 2014. The market value of the 227,413,290 tradable shares as at 31 December

2013 is approximately RMB1,771,549,529 (2012: RMB2,082,092,000 for 227,551,086

tradable shares).

The directors of the Company concluded that the Group has a sufficiently dominant

voting interest to direct the relevant activities of Ningxia Building Materials on the basis

of the Group’s absolute size of shareholding and the relative size of and dispersion of the

shareholdings owned by other shareholder. The remaining 52.46% ownership interests in

Ningxia Building Materials are owned by thousands of shareholders that are unrelated to the

Group, none individually holding more than 1%.







(Continued)

(5) 19.98% (2012: 19.98%) effective equity interests in Qilianshan Co., a company listed on

the Shanghai Stock Exchange of the PRC. The Group’s equity interests in Qilianshan Co.

represents 205,376,739 (2012: 157,982,107) A shares. The market value of these shares as

at 31 December 2013 is approximately RMB1,373,972,130 (2012: RMB1,674,610,000).

The directors of the Company concluded that the Group has a sufficiently dominant voting

interest to direct the relevant activities of Qilianshan Co., on the basis of the Group’s

absolute size of shareholding and the relative size of and dispersion of the shareholdings

owned by other shareholder. The remaining 80.02% ownership interests in Ningxia Building

Materials are owned by thousands of shareholders that are unrelated to the Group, none

individually holding more than 1%.

(ii) Those subsidiaries were incorporated during the year.

(iii) The operations of the principal subsidiaries are principally located in the PRC, Middle East and other

Asian countries.

Except for Sinoma International, Sinoma Science & Technology, Tianshan Cement, Ningxia Building

Materials, Qilianshan Co. which are listed companies in the PRC, all subsidiaries, joint ventures

and associates have substantially the same characteristics as a Hong Kong incorporated private

company.

The English names of certain subsidiaries referred to in these consolidated financial statements

represent management’s best effort at translating the Chinese names of these companies as no

English names have been registered.

Except for the medium-term notes as detailed in Note 43, none of the subsidiaries had issued debt

securities at the end of the reporting period.






At the end of the reporting period, the Company has other subsidiaries that are not material to the Group.

The principal activities of these subsidiaries are summarised as follows:

Principal activities

Principal place of

business Number of subsidiaries

31 December

2013

31 December

2012

Investment holdings The PRC 3 3

Investment holdings India 1 1

Construction and engineering services The PRC 32 30

Construction and engineering services Malaysia 1 1

Manufacture of cement equipment The PRC 10 9

Cement operations The PRC 107 102

Glass fiber operations The PRC 5 5

High-tech materials operations The PRC 24 23

Production and sale of non-metallic crystal The PRC 2 2

Publication service The PRC 3 3

Mining, gas supply and inspection The PRC 9 9

Sales of wind power blade The PRC 4 4

Property management The PRC 10 8





(b) Details of non-wholly owned subsidiaries that have subsidiary of the Group that have material non-controlling interests:

The table below shows details of non-wholly-owned subsidiaries of the Group that have material non-

controlling interests:

Name of subsidiaries

Place of incorporation/registration

Paid up issued/ordinary share

capital

Proportion of ownership interests and voting rights held

by non-controlling interestsProfit (loss) allocated to non-controlling interests

Accumulated non-controlling interests

RMB’000 2013 2012 2013 2012 2013 2012

Sinoma International The PRC 1,093,297 57.54% 57.54% 19,863 433,234 2,606,463 2,801,932Sinoma Science & Technology The PRC 400,000 45.68% 45.68% 63,269 70,695 1,352,222 1,419,439Tianshan Cement The PRC 880,101 64.51% 64.61% 296,339 376,373 5,716,136 5,464,469Ningxia Building Materials The PRC 478,318 52.46% 52.43% 230,473 68,936 2,556,338 2,338,764Qilianshan Holdings The PRC 352,679 49.00% 49.00% 492,811 153,827 4,604,428 3,992,216Sinoma Jinjing Fiber Glass The PRC 203,957 49.99% 49.99% (5,680) (1,474) 143,608 149,119





(b) Details of non-wholly owned subsidiaries that have subsidiary of the Group that have material non-controlling interests: (Continued)

The summarised financial information in respect of the Group’s subsidiaries that have non-controlling

interests that are material to the Group for the year ended 31 December 2013, before intragroup

eliminations:



Tianshan Cement


QilianshanHoldings

Sinoma Jinjing Fiber Glass


As at 31 December 2013Current assets 20,434,257 3,694,977 4,477,971 2,396,870 2,522,595 132,785

Non-current assets 3,263,950 2,797,802 17,182,309 5,603,138 8,863,444 307,769

Current liabilities (17,855,933) (3,233,854) (8,745,224) (2,445,108) (4,363,553) (150,364)

Non-current liabilities (1,421,980) (655,969) (4,739,613) (1,063,110) (2,154,689) (2,917)

Equity attributable to owners of the Company 1,813,831 1,250,734 2,459,307 1,935,452 263,369 143,665

Non-controlling interests 2,606,463 1,352,222 5,716,136 2,556,338 4,604,428 143,608

For the year ended 31 December 2013Revenue 20,881,516 3,592,918 8,318,113 4,444,554 6,127,680 171,438

Expenses 20,809,703 3,471,011 7,936,303 4,069,948 5,610,899 182,802

Profit (loss) for attributable to owners of the Company 38,101 58,638 99,163 142,033 22,088 (5,684)Profit (loss) for attributable to the non-controlling

interests 33,712 63,269 282,647 232,573 494,693 (5,680)

Profit (loss) for the year 71,813 121,907 381,810 374,606 516,781 (11,364)

Other comprehensive income (expenses) attributable to owners of the Company (15,652) – 4,804 (1,283) (84) –

Other comprehensive income (expenses) attributable to the non-controlling interests (13,849) – 13,692 (2,100) (1,882) –

Other comprehensive income (expenses) for the year (29,501) – 18,496 (3,383) (1,966) –

Total comprehensive income (expenses) attributable to owners of the Company 22,449 58,638 103,967 140,750 22,004 (5,684)

Total comprehensive income (expenses) attributable to the non-controlling interests 19,863 63,269 296,339 230,473 492,811 (5,680)

Total comprehensive income (expenses) for the year 42,312 121,907 400,306 371,223 514,815 (11,364)






Tianshan Cement


QilianshanHoldings



Dividends paid to non-controlling interests 10,337 3,733 42,968 4,006 63,089 –

Net cash inflow (outflow) from operating activities (182,514) 252,818 211,845 577,656 957,563 1,106

Net cash outflow from investing activities (675,916) (762,964) (1,236,340) (276,297) (647,876) (16,533)

Net cash inflow (outflow) from financing activities 701,800 308,932 1,111,157 (689,776) (682,486) 67

Effect of changes in exchange rate (18,901) (1,928) – – – (712)

Net cash inflow (outflow) (175,531) (203,142) 86,662 (388,417) (372,799) (16,072)








The summarised financial information in respect of the Group’s subsidiaries that have non-controlling

interests that are material to the Group for the year ended 31 December 2012, before intragroup

eliminations:



Tianshan Cement


QilianshanHoldings



As at 31 December 2012Current assets 18,784,741 3,406,573 3,829,857 2,485,737 2,596,836 250,474

Non-current assets 2,741,491 2,489,931 15,664,244 5,215,760 8,104,838 373,526

Current liabilities (16,005,747) (2,781,971) (7,056,071) (1,950,438) (4,198,634) (321,984)

Non-current liabilities (729,989) (354,185) (4,596,858) (1,607,036) (2,284,453) (3,750)

Equity attributable to owners of the Company 1,988,564 1,340,909 2,376,703 1,805,259 226,371 149,147

Non-controlling interests 2,801,932 1,419,439 5,464,469 2,338,764 3,992,216 149,119

For the year ended 31 December 2012Revenue 21,349,128 3,045,735 8,074,731 3,343,613 4,458,045 314,731

Expenses 20,599,418 2,906,103 7,619,993 3,245,662 4,290,968 317,679

Profit (loss) for attributable to owners of the Company 317,376 68,937 104,726 28,397 12,185 (1,472)Profit (loss) for attributable to the non-controlling

interests 432,334 70,695 350,012 69,554 154,892 (1,476)

Profit (loss) for the year 749,710 139,632 454,738 97,951 167,077 (2,948)

Other comprehensive income (expenses) attributable to owners of the Company 661 – 7,887 (252) (84) 3

Other comprehensive income (expenses) attributable to the non-controlling interests 900 – 26,361 (618) (1,065) 3

Other comprehensive income (expenses) for the year 1,561 – 34,248 (870) (1,149) 6

Total comprehensive income (expenses) attributable to owners of the Company 318,037 68,937 112,613 28,145 12,101 (1,469)

Total comprehensive income (expenses) attributable to the non-controlling interests 433,234 70,695 376,373 68,936 153,827 (1,473)

Total comprehensive income (expenses) for the year 751,271 139,632 488,986 97,081 165,928 (2,942)






Tianshan Cement


QilianshanHoldings



Dividends paid to non-controlling interest 9,158 11,979 7,214 5,982 30,885 –

Net cash inflow from operating activities 1,129,732 95,515 328,565 118,683 668,842 11,157

Net cash outflow from investing activities (433,345) (495,503) (2,941,521) (216,862) (1,126,759) (12,298)

Net cash (outflow) inflow from financing activities (267,956) 174,348 1,916,469 (248,876) 424,366 6,497

Effect of changes in exchange rate (16,243) 2,237 – – – (143)

Net cash inflow (outflow) 412,188 (223,403) (696,487) (347,055) (33,551) 5,213






57. THE STATEMENT OF FINANCIAL POSITION OF THE COMPANY2013 2012

Note RMB’000 RMB’000(Restated)

Non-current assets Property, plant and equipment 6,237 5,710 Intangible assets 6,289 3,431 Investments in subsidiaries 11,473,185 11,412,089 Investment in an associate 904,700 904,700 Available-for-sale financial assets 1,635,064 1,945,271 Deferred income tax assets 15,798 10,161

14,041,273 14,281,362

Current assets Other receivables 1,914,141 1,154,144 Bank balances and cash 24,489 109,726

1,938,630 1,263,870

Current liabilities Other payables 170,756 136,966 Dividend payables 8,117 7,936 Income tax liabilities 1,522 1,005 Short-term financing bills 1,000,000 – Borrowings 750,000 1,070,000 Early retirement and supplemental benefit obligations 6,735 4,425

1,937,130 1,220,332

Net current assets 1,500 43,538

Total assets less current liabilities 14,042,773 14,324,900

Non-current liabilities Corporate bonds 2,492,782 2,490,239 Medium-term notes 1,700,000 1,700,000 Borrowings 400,000 300,000 Early retirement and supplemental benefit obligations 47,618 35,526 Deferred income tax liabilities 307,156 384,707

4,947,556 4,910,472

NET ASSETS 9,095,217 9,414,428

Capital and reserves Share capital 3,571,464 3,571,464 Reserves (a) 5,523,753 5,842,964

TOTAL EQUITY 9,095,217 9,414,428




57. THE STATEMENT OF FINANCIAL POSITION OF THE COMPANY (Continued)

(a) The movements in the reserves of the Company during the reporting period are:

Share

premium

Capital

reserve

Statutory

surplus

reserve

Investment

revaluation

reserve

Other

reserves

Retained

earnings Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000(Note b (i))

At 1 January 2012,

as originally reported 3,273,160 (546,272) 75,828 1,209,762 1,495,737 112,743 5,620,958

Effect of changes in accounting policies – – – – 569 – 569

At 1 January 2012, as restated 3,273,160 (546,272) 75,828 1,209,762 1,496,306 112,743 5,621,527

Profit for the year – – – – – 458,620 458,620

Other comprehensive income (expenses)

for the year

Actuarial loss on defined benefit

obligations – – – – (12,042) – (12,042)

Income tax relating to actuarial loss on

defined benefit obligations – – – – 3,010 – 3,010

Fair value changes of available-for-sale

financial assets – – – (72,766) – – (72,766)

Income tax relating to fair value changes

of available-for-sale financial assets – – – 18,191 – – 18,191

Total comprehensive (expenses) income

for the year – – – (54,575) (9,032) 458,620 395,013

Dividend recognised as distribution – – – – – (214,288) (214,288)

Government contributions – – – – 40,712 – 40,712

Appropriation to statutory surplus

reserve (Note b (ii)) – – 45,802 – – (45,802) –

At 31 December 2012, as restated 3,273,160 (546,272) 121,630 1,155,187 1,527,986 311,273 5,842,964





(a) The movements in the reserves of the Company during the reporting period are: (Continued)

Sharepremium

Capitalreserve

Statutorysurplusreserve

Investmentrevaluation

reserveOther

reservesRetainedearnings Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000(Note b (i))

At 1 January 2013, as restated 3,273,160 (546,272) 121,630 1,155,187 1,527,986 311,273 5,842,964Profit for the year – – – – – 15,720 15,720Other comprehensive income (expenses) for the year – – – – – – –Actuarial loss on defined benefit obligations – – – – (19,724) – (19,724)Income tax relating to actuarial loss on defined benefit obligations – – – – 4,932 – 4,932Fair value changes of available-for-sale financial assets – – – (310,207) – – (310,207)Income tax relating to fair value changes of available-for-sale financial assets – – – 77,552 – – 77,552

Total comprehensive (expenses) income for the year – – – (232,655) (14,792) 15,720 (231,727)

Dividend recognised as distribution – – – – – (107,144) (107,144)Government contributions – – – – 19,660 – 19,660Appropriation to statutory surplus reserve (Note b (ii)) – – 5,814 – – (5,814) –

At 31 December 2013 3,273,160 (546,272) 127,444 922,532 1,532,854 214,035 5,523,753

(b) The reserves of the Company

(i) In October 2007, Sinoma Group entered into an irrevocable guarantee agreement with the

Ministry of Commerce of the PRC (“MOC”), which released a guarantee previously provided by

the Company to a subsidiary of Sinoma Group on a special foreign aid fund loans lent by MOC

to such subsidiary. According to the agreement, Sinoma Group will assume the responsibility as

the guarantor of the loans. The provision made by the Company for such guarantee, amounting to

RMB98,700,000, was reversed and accounted for as an equity contribution from Sinoma Group.

During the year ended 31 December 2013, national funds amount to RMB19,660,000 (2012:

RMB40,712,000) are contributed by the PRC Government to the Company through Sinoma Group.

Such funds are used specifically for energy saving and emission reduction and key industries

construction projects.

Pursuant to the requirements of the relevant notice, the national funds are designated as capital

contribution and vested solely by the PRC Government. They are non-repayable and can be

converted to share capital of the entities receiving the funds upon approval by their shareholders

and completion of other procedures.





(b) The reserves of the Company (Continued)

(ii) Statutory surplus reserve

In accordance with the PRC Company Law and the Company’s articles of association, the Company is

required to appropriate 10% of its profit after tax as determined in accordance with the PRC GAAP and

regulations applicable to the Company, to the statutory surplus reserve until such reserve reaches 50%

of the registered capital of the Company. The appropriation to the reserve must be made before any

distribution of dividends to owners.

The statutory surplus reserve can be used to offset previous years’ losses, if any, and part of the statutory

surplus reserve can be capitalised as the Company’s share capital provided that the amount of such

reserve remaining after the capitalisation shall not be less than 25% of the share capital of the Company.

For the year ended 31 December 2013, the Board of Directors proposed appropriation of 10% of profit

after tax as determined under the PRC GAAP, amounting to RMB5,814,000 (2012: RMB45,802,000), to the

statutory surplus reserve.

(iii) Profit for the year attributable to owners of the Company

The profit for the year attributable to owners of the Company for the year ended 31 December 2013 has

incorporated a profit of approximately RMB15,720,000 (2012: profit of approximately RMB458,620,000)

arising from the financial statements of the Company.


DEFINITIONS

“Articles of Association” or “Articles” The articles of association of the Company as amended from time to time

“Audit Committee” the audit committee of the Board

“BBMG” BBMG Group Co., Ltd. (北京金隅集團有限責任公司), one of the promoters of

the Company

“Beijing CMST” Beijing CMST Logistics Co., Ltd. (北京中儲物流有限責任公司), a limited liability

company incorporated under the laws of the PRC

“BBMG Corporation” BBMG Corporation

“Board” the board of Directors of the Company

“CBMI Constructon” CBMI Construction Co., Ltd. (中材建設有限公司), a wholly-owned subsidiary of


“Cinda” China Cinda Asset Management Co., Ltd. (中國信達資產管理股份有限公司),

one of the promoters of the Company

“Company”, “our Company”,

“we” or “us”

China National Materials Company Limited (中國中材股份有限公司), a joint

stock limited company incorporated on 31 July 2007 under the laws of the

PRC

“Cosco Supply Chain” Cosco Supply Chain Management Co., Ltd. (中遠供應鏈管理有限公司), a limited

liability company incorporated under the laws of the PRC

“CTG” Taishan Fiberglass Inc. (泰山玻璃纖維有限公司), a wholly-owned subsidiary of

the Company

“Director(s)” the director(s) of the Company

“Domestic Shares” ordinary shares of RMB1.00 each in the share capital of the Company, which

are subscribed for and credited as fully paid up in RMB by PRC nationals and/

or PRC incorporated entities

“Group” the Company and its subsidiaries

“H Shares” overseas listed foreign shares of RMB1.00 each in the ordinary share capital

of the Company, which are subscribed for and traded in Hong Kong dollars

and are listed and traded on the Hong Kong Stock Exchange

“Hong Kong Stock Exchange” The Stock Exchange of Hong Kong Limited

“Listing Rules” the Rules Governing the Listing of Securities on The Stock Exchange of Hong

Kong Limited


DEFINITIONS

“LNVT” LNV Technology Private Limited, a limited liability company incorporated in

India

“Ningxia Building Materials” Ningxia Building Materials Group Co., Limited (寧夏建材集團股份有限公司),

the shares of which are listed on the Shanghai Stock Exchange (stock code:

600449), a subsidiary of the Company

“Nomination Committee” the nomination committee of the Board

“NRDI” Nanjing Fiberglass R&D Institute Co., Ltd. (南京玻璃纖維研究設計院有限公司),

a limited liability company established under the laws of the PRC

“Parent” or “Sinoma Group” China National Materials Group Corporation Ltd. (中國中材集團有限公司), the

controlling shareholder and one of the promoters of the Company

“Parent Group” collectively, Parent and its subsidiaries (excluding the Group)

“PRC” or “China” the People’s Republic of China, which for the purpose of this annual report

only (unless otherwise indicated) excludes Hong Kong, the Macau Special

Administrative Region of the PRC and Taiwan

“Qilianshan Co.” Gansu Qilianshan Cement Group Company Limited (甘肅祁連山水泥集團股份有限公司), the shares of which are listed on the Shanghai Stock Exchange (stock

code: 600720), a subsidiary of the Company

“Qilianshan Holdings” Gansu Qilianshan Building Materials Holdings Company Limited (甘肅祁連山建材控股有限公司), a subsidiary of the Company

“Remuneration Committee” the remuneration committee of the Board

“RMB” Renminbi, the lawful currency of the People’s Republic of China

“Runji Cement” Longnan Runji Cement Co., Ltd. (隴南市潤基水泥有限責任公司)

“SDRI” Suzhou Design and Research Institute of Non-metallic Minerals Industry

Co., Ltd. (蘇州非金屬礦工業設計研究院有限公司), a limited liability company

established under the laws of the PRC

“Sinoma (Hong Kong)” China National Materials (Hong Kong) Co., Limited (中國中材股份(香港)有限公司), a wholly-owned subsidiary of the Company incorporated under the laws of

Hong Kong

“Sinoma Advanced Materials” Sinoma Advanced Materials Co., Ltd. (中材高新材料股份有限公司), a subsidiary

of the Company


DEFINITIONS

“Sinoma Cement” Sinoma Cement Co., Ltd. (中材水泥有限責任公司), a wholly-owned subsidiary

of the Company

“Sinoma E&E” Sinoma Equipment & Engineering Corp., Ltd. (中國中材東方國際貿易有限公司),

a wholly owned subsidiary of Sinoma International

“Sinoma Finance” Sinoma Group Finance Co., Ltd.(中材集團財務有限公司), a limited liability

company incorporated under the laws of the PRC

“Sinoma International” Sinoma International Engineering Co., Ltd. (中國中材國際工程股份有限公司),

the shares of which are listed on the Shanghai Stock Exchange (stock code:

600970), a subsidiary of the Company

“Sinoma Jinjing” Sinoma Jinjing Fiber Glass Co., Ltd. (中材金晶玻纖有限公司), a subsidiary of

the Company

“Sinoma Mining” Sinoma Mining Construction Co., Ltd. (中材礦山建設有限公司), a wholly-owned

subsidiary of the Company

“Tianjin Company” Beijing Tianjin Petroleum Sales Co., Ltd. (北京天金石油銷售有限公司)

“Tianlianhai Company” Beijing Tianlianhai Chemical Co., Ltd. (北京天連海化工有限責任公司)

“Sinoma Science & Technology” Sinoma Science & Technology Co., Ltd. (中材科技股份有限公司), the shares

of which are listed on the Shenzhen Stock Exchange (stock code: 002080), a


“SK” Schmidt, Kranz & Co. Gesellschaft mit beschränkter Haftung

“Strategy Committee” the strategy committee of the Board

“Substantial Shareholder” has the meaning ascribed to it under the Listing Rules

“Supervisor(s)” the supervisor(s) of the Company

“Supervisory Committee” the supervisory committee of the Company

“Suzhou Company” Suzhou Sinoma Design and Research Institute of Non-metallic Minerals

Industry Co., Ltd. (蘇州中材非金屬礦工業設計研究院有限公司), a limited liability

company established under the laws of the PRC

“Taishan Investment” Taian Taishan Investment Co., Ltd. (泰安市泰山投資有限公司), one of the

domestic shareholders of the Company

“Tianshan Cement” Xinjiang Tianshan Cement Co., Ltd. (新疆天山水泥股份有限公司), the shares

of which are listed on the Shenzhen Stock Exchange (stock code: 000877), a



DEFINITIONS

“Tianshan Group” Xinjiang Tianshan Building Materials (Group) Company Limited (新疆天山建材(集團)有限責任公司), a subsidiary of the Parent and one of the promoters of the

Company

“Well Kent” Well Kent International Holdings Company Limited (華建國際集團有限公司),

one of the promoters of the Company

“WXC” Wuhai Xishui Cement Co., Ltd. (烏海市西水水泥有限責任公司)

“Xiamen Standard Sand” Xiamen ISO Standard Sand Co., Ltd. (廈門艾思歐標準砂有限公司), a subsidiary

of the Company

“XSGF” Xishui Strong Year Co., Ltd. Inner Mongolia (內蒙古西水創業股份有限公司)

“Zhongke Hongsheng” Beijing Zhongke Hongsheng Technology and Trade Co., Ltd.

“Zibo Hi-Tech” Zibo New & Hi-Tech Venture Capital Co., Ltd. (淄博高新技術風險投資股份有限公司), one of the promoters of the Company

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2013 An

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MATERIALSBRING A PROSPEROUS LIFE

Annual Report 2013


A joint stock company incorporated in the People’s Republic of China with limited liability

(Stock Code: 01893)

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